Britain is not yet ready to join the single currency, Gordon Brown has told MPs.

After two years of number-crunching the chancellor revealed that just one of his five crucial tests for membership had been passed.

But Brown was upbeat about the chances of the situation changing in the next 12 months and moved to put the country on a euro footing.

Promising a "reform agenda" to prepare the economy for membership - with a second assessment coming as early as next year - he insisted that the tests would not be watered down.

"The five tests are our stability guarantee," he said. "If we entered with the tests not met at the wrong exchange rate then just as with the ERM we could see unemployment rise, public service investment fall and growth stalled."

Brown said the Treasury's analysis revealed that Britain could not sustain economic shocks without coming under extreme pressure.

Seeking to put a pro-European gloss on his announcement, Brown said Britain should be committed to the single currency "in principle".

He said joining the euro was "one of the most momentous economic decisions we as a country will have to take".

Membership would deliver lower transaction costs, diminished exchange rate volatility, greater cross border trade and lower and more stable interest rates, MPs were told.

"The government's view is that if the economic case is clear and unambiguous then the constitutional issue, while a factor in the decision, should not be a bar to entry," he said.

"And my conclusion is that if on the basis of the five economic tests membership of the euro is shown as good for sustaining British jobs, British business and British future prosperity then it is economically right and in the national interest to join."