Blair is not losing appetite for referendum, say allies

Allies of Tony Blair dismissed speculation yesterday that he was going cool on plans to hold a euro referendum before the next general election.

Both Downing Street and the Treasury denied a newspaper report suggesting that Mr Blair and Gordon Brown were edging towards a decision which would delay a single currency referendum until early in the next parliament, possibly in late 2005 or early 2006.

The speculation irritated Blair allies, who insisted that a referendum could be held in the spring or autumn of next year if the Government's five economic tests were met. The Chancellor's assessment is expected this autumn or early next year.

The report yesterday in the The Times, which is owned by Rupert Murdoch and opposes a referendum before the next election, provoked a flurry of speculation that the Chancellor was preparing to announce that his much-repeated five economic tests had not been passed "clearly and unambiguously".

But one Blair aide said: "The idea that [Mr Blair] has gone cool on a referendum if the tests are passed is nonsense. There is no evidence of that at all."

Although Mr Brown is believed to be more cautious than the Prime Minister about an early referendum, the Blair and Brown camps were at pains to deny any differences between them.

But the Blair aide admitted: "We don't know what Gordon thinks. They have not had their big discussion yet, so the idea they are already moving towards ruling out a referendum is wide of the mark."

The Blair camp believes that, providing the tests are met, public hostility to the euro can be overcome during a referendum campaign spearheaded by the Prime Minister and Chancellor. They insist that recent opinion polls, showing a clear majority against membership, reflect the absence of a "yes" campaign even though opponents of joining are actively campaigning.

One Blair ally said: "There are a lot of negative messages about the euro, but no positive ones. No wonder the polls are against it. They are putting the thermometer into the water after only one side of the argument has been put."

It is believed that Mr Brown will delay turning his attention to the crucial decision on the euro until after he has unveiled a three-year public spending blueprint in the week after next.

Mr Blair's official spokesman said of the report in The Times: "I have no idea where this story came from. It seems to be crystal ball gazing with a large number of hypotheticals thrown in."

Although Mr Brown gave an interview to The Times earlier this week, a source close to him insisted: "We have no idea where this report came from. It is nothing to do with us."

Despite the denials, the Tories are increasingly convinced that Mr Blair is running scared of a referendum. Iain Duncan Smith, the Tory leader, branded Mr Blair "a coward" on the issue. He told The Spectator magazine: "I have to get inside the head of the Prime Minister, and it's difficult to find which one he's wearing that day. If it's the head marked, 'I believe in the euro', then it's yes. If it's the head marked 'I believe in power', the answer's probably no. If it's the head marked 'I hate Gordon Brown' it could be almost anything. He can't make his mind up. Either way, I think that he's a coward."