Blair and Brown letter outlines euro case to MPs

Following yesterday's 'not yet' decision on the euro, Prime Minister Tony Blair and the Chancellor, Gordon Brown, have written a joint letter to all MPs outlining the case for the UK joining the single European currency.

In the letter, the pair pledge to build a "pro-European consensus in Britain" and says that the gains to Britain "are considerable" inside the single currency.

The possibility of an early referendum – that is, during this parliament – is also mooted.

The letter states that at next year's budget report, "we can then consider the extent of progress and determine whether on the basis of it we make a further Treasury assessment of the five tests which - if positive next year - would allow us at that time to put the issue before the British people in a referendum".

The government predicts that there would be greater cross-border trade and investment, with the potential for increased commerce and growth to the tune of 50% over 30 years.

Also, UK national income could rise over a 30-year period by between 5 and 9%, and output and national wealth could rise by up to 0.25% a year – worth up to £3 billion annually.

Lower transaction costs for business, diminished exchange rate volatility and stable interest rates could see a cut in the cost of borrowing in Britain on a sustainable basis.

It adds: "Since 1997 every economic decision of this government has been designed to build and then entrench stability in order to achieve, for Britain, high and sustainable levels of employment and growth.

"To reap the potential benefits of the euro, we must be sure that there is cyclical and structural convergence between Britain and the euro area and sufficient flexibility to withstand stresses and strains."

One of the biggest problems in rationalising Britain with the eurozone is the boom and bust housing market and the majority reliance on variable rate mortgages. The government plans to change the planning and supply of housing, and promote fixed rate long-term mortgages to reduce demand and protect homeowners from markets fluctuations.

However, Conservative Shadow Chancellor Michael Howard has criticised the government for its "dithering" and "uncertainty". He said that the referendum had not been called now because the government could not hope to win it.

He added: "This is a government which promised to 'prepare and decide', but now it's not prepare and decide. It's not even 'wait and see'. It's just 'hope and pray'.

"Today they haven't put off a referendum because they are against joining the euro, or because they think it will damage the national economic interest. They haven't put of a referendum out of conviction."

(GMcG)