A new study has cast doubt on the Treasury's claim that Britain's housing market is the major barrier to euro entry.

The Ernst and Young Item club, using the same forecast methods as the government, argues that even a 10 per cent fall in house prices would not derail convergence between the UK and eurozone economies.

Meanwhile the chancellor has played down suggestions that he is working towards a 73 pence entry rate into the single currency.

A target would only be set once euro entry was recommended, he insisted.