UK Chancellor Gordon Brown
announced the government's
decision on Monday

In his speech to parliamentarians, Brown outlined why the United Kingdom would hold out from joining the euro.

In 1997 Brown himself imposed five economic tests on the potential impact of euro entry. On Monday he declared that Britain had failed four of the Treasury tests.

Brown said the government would report back on progress towards meeting the tests in the Budget next year - and then decide whether to perform the tests again.

But he spoke at length describing how he believed that Britain would, and should, join the euro.

"Our view that membership in a successful single currency would be of benefit to the British people as well as to Europe is strengthened by the results of our assessment," Brown said.

He said a referendum bill would be unveiled in the autumn to pave the way for a possible referendum next year.

That means the government has left the door ajar to take the issue to the country before the next general election.

Brown himself undertook something of a sales pitch to express the benefits that closer integration in Europe would bring the UK.

Signing up to the euro would boost British trade within Europe, “perhaps to the extent of 50 percent over 30 years,” he declared.

Brown set out other potential benefits of joining the euro, such as a growth in national income, higher living standards and lower prices.

But he warned that joining at the wrong time could see unemployment rise, see cuts in public service spending and stall economic growth.

Prime Minister Blair called world
leaders to explain the verdict

According to a government spokesperson, the prime minister made a series of calls to world leaders following the announcement to explain the verdict.

Blair was due to speak with no fewer than nine leaders including French President Jacques Chirac, German Chancellor Gerhard Schroeder and Japanese Prime Minister Junichiro Koizumi, the government spokesperson said.

Expected announcement draws criticism

The details of Brown’s speech were largely expected, but drew sharp criticism nonetheless.

The Tories ridiculed the announcement, with shadow chancellor Michael Howard saying the tests had been "drawn up on the back of an envelope".

He said the statement was the "result of the frantic efforts by the chancellor and the prime minister to cover up their differences".

"This whole exercise has been an exercise in deceit," Howard told parliament.

But pro-European business groups were equally disappointed, albeit for different reasons.

"Every year the UK stays out, the greater the difficulties that will be faced in competing for investment across the EU and the more difficult it will be for the UK to remain competitive," said Niall Fiztgerald, chairperson of household goods giant, Unilever.