Euro hopes

Charles Kennedy, the Lib Dem leader, has called on Tony Blair to convene a cross-party cabinet committee charged with developing a more coherent policy on the single currency ahead of a referendum as early as 2003.

Kennedy, who broke off relations with Labour last autumn, says the groundwork will have to begin soon if the government is to stand any chance of persuading the public to back British membership of the single currency.

Interviewed by epolitix.com, Kennedy says he would "instinctively" support the formation of a cabinet committee on the euro.

"I need to consult internally first obviously, but I would have thought it is a constitutional issue and we're the party that has always promoted the need for a referendum," he said.

Cross Party

Kennedy said he would like to see more co-operation between the prime minister and opposition politicians - including the pro-euro Tories Michael Heseltine and Kenneth Clarke.

"I have no difficulty with that in principle - Heseltine, Clarke, Blair, Brown and myself have all shared a platform on the Britain in Europe launch, and therefore, I remain clear on my willingness to co-operate on this one," he said.

He also believes that organisations such as the TUC and the CBI should be drafted in to assist in driving forward to the pro-euro cause.

"To have the Liberal Democrats, the government, significant figures within the Conservative Party, the CBI and the TUC all campaigning for a 'yes' vote is a powerful coalition of opinion," he said.

"People will look at the alternative - those putting forward the anti-argument - presumably Iain Duncan Smith, Norman Tebbit, other sections of the Conservative Party, and people like Tony Benn, Margaret Thatcher and David Owen. I don't think that represents the centre of gravity."

Decision Soon

Kennedy says the prime minister wants to sign Britain up to the single currency within the next four years.

"My reading of the prime minister's temperament on all this is that he would like to have this issue resolved in favour of full British participation in the single currency by the end of this parliament," he said. "Therefore I think that he is increasingly going to apply himself rhetorically and politically."

Government sources have let it be known that Blair believes the case for the single currency will be strengthened when euro notes and coins go into circulation on January 1.

Over a third of high street stores have already signalled that they will accept the euro once it comes into effect.

He said the launch of notes and coins will move the debate on because of the millions of people who cross the Channel or go to Ireland on holiday or for business.

"They will soon begin to see that they are losing out financially if they are having to do endless currency transactions. They will also be going into shops and supermarkets in Britain where provision will have been made for accommodating the euro and they will begin to think about this," he said.

Kennedy argues that the introduction of euro notes and coins will begin a steep "learning curve" within the population as a whole. But he stresses that the momentum could be lost if the government continues to sit on the fence.

"I think the next year is very important and we need to hit the ground running after January 1," said Kennedy.

The Conservatives dismissed the suggestion that they would work with Labour or the Lib Dems on the issue.

"Our policy on the euro is clear," said a spokesman. "We will oppose the single currency when a referendum is held."