Despite drawing a negative assessment the government could still hold a referendum on the euro in spring 2005.

Whilst the five tests have not yet been met, Gordon Brown set the wheels in motion for British membership once conditions change

The chancellor said he will report on whether there has been any progress towards meeting the tests in the Budget next year.

Depending on the extent of progress the Treasury could then make a fresh assessment of the five tests in the autumn of 2004.

Meanwhile, a draft Referendum Bill paving the way for the poll will be published this autumn.

The government's official changeover plan - which sets out the path towards "e-day" - says that there should be a minimum of four months between a decision to join and a referendum.

That suggests that spring 2005 is the earliest date at which a referendum will be held.

Plans for a May 2005 election would have to be shunted backwards unless the government took the controversial step of holding the referedum on the same day as the general election.