A senior Treasury official has "no recollection" of saying that the decision to join the euro will be a political rather than economic one.

Reports of the comments by Gus O'Donnell, who is in charge of completing the economic assessment of whether Britain should join the Euro, prompted accusations from the Conservatives and Liberal Democrats that the five economic tests are just a way of stalling a referendum.

O'Donnell's remarks are likely to embarrass Tony Blair. The prime minister has always insisted that he will only call a referendum once the five economic tests are met. However, O'Donnell told a private seminar in November that the Treasury will be unable to give a "clear and unambiguous verdict".

The Treasury has played down the reports of O'Donnell's remarks.

"They are a complete misrepresentation of what he actually said," it said. "O'Donnell has no recollection of saying ultimately it will be a political decision. Any government decision on the euro will be based on a thorough and rigorous assessment of the five economic tests. The economic case must be clear and unambiguous."

However, critics have seized upon the comments to suggest that the economic tests are just an excuse to stall a referendum. Michael Howard said that the government's credibility is now at stake, after repeatedly saying that Britain should only join the single currency if Gordon Brown's tests were met.

The shadow chancellor said: "The man in charge of that assessment has admitted that it can never be clear and unambiguous, so the Government should accept that Britain should not enter the euro. Officials regard the euro as a purely political project."

At the seminar, O'Donnell also stressed the difficulties of a common European economic policy. He suggested that the British economic model was better than that of the European Central Bank, which has to decide monetary policy for the 12 member states.

Dominic Cummings, director of the Business for Sterling campaign, said: "This is the best indication yet that the Treasury realise just how flawed the euro is and will recommend a big 'No'."