Brown's armlock is tighter than ever

Now there will be a review before an assessment before a referendum. Entry to the single currency st

Britain's two leaders have tried cross-dressing. Gordon Brown put the case for the euro. Tony Blair put the case for economics. Their minders were pleased with their efforts: "It was as if they were reading from each other's scripts," says one aide, by way of a compliment.

A truce has been called in their bitter fight for political hegemony. It won't last long, but that it is taking place at all is no mean feat. The outline of the latest battle over the past three months was known; its detail is by turns compelling and alarming.

It was only in January that the Prime Minister realised that the Treasury's assessment of the five economic tests was proceeding as quickly as it was. The background analysis, all 1,738 pages of it, was close to completion even before No 10 had taken a proper look. From the end of that month, at Blair's behest, a series of "seminars" was held, going through each of the 18 studies that made up the actual assessment.

Eight of these gatherings were held in February and March. Blair took his Europe adviser, Sir Stephen Wall, his former Treasury number-cruncher, Jeremy Heywood, and his ever-vigilant chief of staff, Jonathan Powell. Brown's team included Ed Balls, his chief economic adviser, Gus O'Donnell, his permanent secretary who was overseeing the assessment, and other officials.

At the same time, Blair and Brown met one-to-one no fewer than 20 times - all this when Britain's diplomatic strategy over Iraq was in meltdown, the war was being fought and a postwar strategy was hastily being drawn up. They met in Blair's flat. They met in Blair's office. They met, on one occasion for more than four hours, at Chequers. Blair was desperate to salvage something from a process whose ownership he had ceded to his friend and rival in a rush of panic in the autumn of 1997. Brown held all the levers. By the time Brown formally presented his findings to Blair on 1 April, it was too late to do anything about the actual conclusion - that only one test in five had been passed.

Brown was ready and raring to give the assessment on Budget day, 9 April. Blair vetoed that, in an attempt to gain more time. That day also marked the high point of the war, with the dramatic pictures of Saddam Hussein's statue tumbling down. Blair's advisers urged him to use the "Baghdad bounce" to compensate for the unhappy euro process.

In the statement presented to parliament on 9 June and in the deliciously uncomfortable joint press conference the following day, Brown gave Blair some impressive-sounding language, the semblance of momentum and a promise to revisit the issue in March. These were relatively cost-free concessions. The language, as Blair knows over weapons of mass destruction, is easy to deliver, much harder to marry with the reality. The "strong pro-Europe national consensus" will now be proclaimed over the coming year.

The euro advocates still do not have the "road map" they were looking for. Instead they have "staging posts". They have a more European inflation target. They have proposals for housing reform, they have - to the chagrin of trade unions - a regional or local dimension to public sector pay, and they have the promise of a draft referendum bill. This will not set pulses racing. Still, Brown did show willing by breakfasting on 11 June with the board of Britain in Europe, the oft-frustrated lobby group for the euro. Hours later, he and Blair conjured another display of unity at the Parliamentary Labour Party. Brown stressed that his "pragmatic" approach should be a unifying factor. Those present said Peter Mandelson had apologised for accusing Brown of a lack of political will a couple of weeks previously. Intriguingly, Mandelson was said to have conceded that a referendum next autumn was not vital.

So desperate were they to get over the dreaded announcement that neither Blair's camp nor Brown's has thought much further beyond it. They are agreed that there will be no more roadshows of the kind tried by ministers for Europe - Keith Vaz, Peter Hain and others. Blair wants his pro-euro cabinet ministers such as Patricia Hewitt and Charles Clarke to "get out there", armed with all these new facts and promises. "They now have a catechism to enable them to argue the case," says No 10. But the case for what? For the euro as a good thing in principle or for a referendum at the first available date, next autumn?

And how? When I asked Blair whether that entailed "rolling up his sleeves" and for the first time taking on Rupert Murdoch, he recoiled. Brown's people see it quite differently. "The problem in the first parliament is that some of our colleagues did a spot of freelancing on the euro," said one Treasury figure. "There will be no freelancing now. They now feel they have ownership of the policy." By that he presumably meant they had been given two weeks to read the assessments. There was no show of hands at the cabinet's three-hour special meeting on 5 June. Everyone was invited to speak. Everyone was told not to leak any information. Everyone was told that they all agreed.

Brown's armlock on the policy is tighter than it ever was. He now has a review before an assessment before a referendum. He has five criteria to come before the five assessments. The entire process is back in the Treasury, now wedded to a Budget process. And once again the Treasury says it is far too early and far too sensitive to go into the details of how it will conduct its review and how the rest of Whitehall will be included.

In his ring-round to European leaders, to reassure them that his heart was really in the project, Blair was said to have told them of a "distinct and realistic" possibility of a referendum in late 2004. That pledge will have been greeted with sympathy, but wry smiles. When Blair attends next weekend's EU summit, he will, now Iraq and the euro are done, have rarely been in a weaker position. Even if Brown did the decent thing for Blair, even if he provided a positive review and a positive assessment a few months on, they face a daunting struggle to turn public opinion around.

The most salutary lesson comes from Ireland, that most pro-European of nations. On the same day as the last general election in Britain, 7 June 2001, the Irish rejected the Nice treaty paving the way for EU enlargement. The vote was held again in October 2002: the treaty was accepted. The reasons for the original defiance were local and often not related to the actual issue. Voters simply wanted to give the government a bloody nose.

That is Blair's problem, writ large. British voters, even when presenting Labour with its second successive landslide, showed themselves to be surly and aggrieved. The turnout was a historic low. Single-issue plebiscites are tailor-made for giving incumbents a good kicking, even more so when critics of the government won't vote for the Conservative alternative of Iain Duncan Smith in a general election. Polling commissioned by the "no" lobby group New Europe suggests that 79 per cent of voters say they would make up their own minds and would not be influenced by the views of politicians. Only 7 per cent said they would follow Blair's advice. His powers of persuasion are not what they were.

Add to that polls showing a steady drop in trust overall in the government and in Blair as a leader; add to that a Eurosceptic press that has not yet fired its most potent weapons; add to that an economic case for adopting a new currency that both the Chancellor and now even the Prime Minister say is far from being made - and the prospects for Britain joining the euro look bleak indeed.

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