Britain is not ready to join the single currency but could be so within a year, 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.

"We conclude that the financial services test is met," he said. "We have still to meet the two tests of sustainable convergence and flexibility.

"Subject to the achievement of convergence and sufficient flexibility the tests for investment and employment would be met."

Promising a "reform agenda" to prepare the economy for euro 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.

"We must be sure of sustainable convergence," added the chancellor.

In a technical statement MPs were told that Britain was more vulnerable to shifts in interest rates.

Brown said the government was "determined to do more to address" volatility in the housing market.

He said "considerable progress" had been made on the convergence test and hailed "grounds for optimism".

"Because of our history of stop go prudence dictates a cautious approach," he said.

But 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 single currency 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, 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."

The announcement comes ahead of a joint press conference between the chancellor and the prime minister tomorrow.

Calling for a debate on Europe, Blair and Brown will set out what many see as a roadmap towards British membership of the euro.

Echoing today's remarks they will say that a "pro-European consensus" must be forged throughout the UK.

The move will be seen as a fresh effort to persuade a sceptical public of the benefits of joining the eurozone.

In addition to the report on his five tests the chancellor also published a blueprint setting out the changeover plans to be put in place when Britain eventually decides to joining the eurozone.

The Treasury also released 1700 pages of notes on the effect of euro membership on all aspects of the economy.

Split into 18 reports the content underlined the government's commitment to keeping the pound until the case for euro membership had been proven.

"The government has set exacting requirements for the assessment to ensure that it provides a sound basis for a decision of this magnitude," they say.

"The government will only make a decision to recommend joining EMU if the case is clear and unambiguous."

Downing Street had earlier defended the government's long and complex assessment process.

"I don't think it is understating it to say that a decision about a nation's currency is one of the most important decisions any government can take," said a spokesman.

"The detailed nature of this process, the very lengthy analysis of the economics by the Treasury as well as the process of consultation with Cabinet colleagues indicate how seriously the government is approaching this."

Addressing MPs the chancellor also called for the removal of tariffs, regulatory and competition barriers between Europe and the US.