Tories challenge Blair over euro

Conservative Party leader Mr Iain Duncan Smith has challenged Mr Tony Blair to call an early referendum on the euro and predicted a 'No' vote by the British people.

However former leader of the Commons, Mr Robin Cook, has urged the Prime Minister and Chancellor Gordon Brown to set a target date for British membership of January 2007 - insisting this would enable them to make the case "with vigour" and carry a 'Yes' vote early in the next parliament.

Both men raised the temperature in the gathering debate ahead of an expected cabinet discussion later this week in anticipation of the Chancellor's assessment of the Treasury's famed five economic "tests" for British membership. Their interventions coincided with a warning from a panel of international economists that "the alternative to the euro is not the status quo" and that staying out of the euro could cost Britain dear in terms of an adverse effect on trade, inward investment and the location of financial markets.

Speaking at the launch of the report commissioned by the Britain in Europe campaign on the consequences of staying out, Mr Cook acknowledged the widespread expectation that the Chancellor would declare the tests "not yet" met. However, in his first major contribution to the debate since quitting the cabinet over the war on Iraq, Mr Cook warned that failure to set a firm timetable for meeting them would "torpedo" the assumption throughout Europe that the Blair government was committed to joining as soon as possible.

"Britain would lose its unique status as a 'pre-in' and be reduced to a definite 'out'," said Mr Cook, adding that this would increase the penalties for not being a member of the single currency: "It would convince our European partners that we are not serious about joining the euro and result in Britain being frozen out of the core of Europe." With Mr Blair and Mr Brown still to agree the final terms of the Chancellor's "not yet" verdict later this month, Mr Cook appeared to distance himself from those, like Mr Peter Mandelson, urging Mr Brown to keep open the possibility of a referendum during the present parliament. Dismissing the idea that the "tests" could be routinely reviewed, Mr Cook said: "You cannot run the British economy on the basis that every 100 miles or so you check the dipstick to see if we have now passed the five economic tests." Making it a government priority to ensure the tests were passed by the end of 2006, on the other hand, "would appear entirely rational throughout the continent where the countries of the euro zone made a strategic commitment to the euro and then set about pursuing the economic policies to make membership of the euro possible" he said.

However Mr Duncan Smith insisted the government's economic tests were "a very elaborate smokescreen" and that its desire to join, and its judgment on when to try to join, were "based on politics not economics." Noting Mr Blair's reluctance to rule out membership for any prolonged period, the Conservative leader challenged Mr Blair to end the uncertainty "and get on with calling a referendum to find out exactly what the British people think."