Blair and Brown head for crunch over euro

Tony Blair and Gordon Brown are heading for a clash over whether to rule out a referendum on joining the euro until after the next general election.

The Chancellor's assessment of the five economic tests for membership, to be completed by June, is expected to deliver a "not quite yet" verdict.

There is growing speculation in Whitehall the assessment will say "four or four-and-a-half of the tests have been met." One source said: "We expect to be about 90 per cent there."

Mr Brown believes such a conclusion would not justify a "Yes" verdict because the Government's policy is that the tests must be passed in a "clear and unambiguous" way.

However, Mr Blair will argue the Government could still deliver a "Yes" verdict because he believes Britain is on course to pass all the tests in the next year or two. As The Independent revealed last month, the Prime Minister has decided to delay a referendum until at least next year in order to give himself time to combat public hostility towards joining the euro.

If he cannot persuade Mr Brown to say "Yes" on the grounds that the tests will soon be met, Mr Blair will propose that they be looked at again next year or the year after.

One Cabinet minister close to Mr Blair said: "He does not want to rule out a referendum for the whole Parliament. He wants to keep the door open."

However, one ally of Mr Brown said: "If the tests have not been met, we should rule it out for the Parliament. You can't keep looking at it every six months or a year until you get the right result. People would see that as a political fix rather than a decision taken on economic grounds."

The Chancellor is also worried that keeping the euro option open could put Britain's economic stability at risk by prompting constant speculation in the financial markets.

The dispute mirrors a clash between Mr Blair and Mr Brown when the Government's policy on the euro was announced in 1997. The Prime Minister was upset the Chancellor's aides ruled out a referendum until after the next general election, saying that went beyond the policy the two men had agreed.

Mr Brown believes Britain will join the euro eventually but is more cautious than Mr Blair about early entry. On Monday, the Chancellor will publish a White Paper on economic reform and efforts to create jobs in Europe amid signs that the Treasury is worried the EU has not made swift enough progress. Brown allies are also contrasting last week's decision by the Bank of England to cut interest rates with the European Central Bank's refusal to follow suit despite low growth in the eurozone.

Today, Mr Brown will tell Labour's spring conference in Glasgow that the Government is the first Labour administration to be able to confidently plan for the long term on a basis of economic stability while still spending record sums on public services.