The chancellor has been urged to keep open the option of joining the euro.

Ahead of next week's Budget, former Cabinet minister Stephen Byers called on Gordon Brown to use a twin track approach to demonstrate that the government was serious about joining the single currency.

Writing in the FT, the former transport secretary said he did not regard the chancellor as a barrier to joining the euro but argued he was in danger of being seen as an opponent.

"He will recommend joining only if he is convinced of the long-term benefits of doing so," he wrote.

"That does not mean we cannot be more pro-active in putting in place a process that keeps open the option of joining the euro, subject to the support of the people in a referendum."

Byers, who is a close ally of the prime minister, said a clear timetable for assessing the five economic tests had to run alongside a programme of EU reform.

"We are now at a stage where a twin track approach is necessary. A timetable would demonstrate that the government is serious about the possibility of joining," he wrote.

Byers raised the issue as the chancellor will include his latest thinking on the issue as part of his Budget statement.

His comments come on the day Brown holds a round of last-minute meetings with Cabinet ministers who want to lobby him for extra cash.

An indication of how tough the negotiations are is a letter from defence secretary Geoff Hoon to Tony Blair warning of the consequences of big cuts to his department's budgets.

He made a direct plea to the prime minister, going over the head of the chancellor, and warned military operations will be put at risk by Treasury demands for a £1.2 billion cut in defence spending plans.

Downing Street played down the press reports.

"It's not the first time in advance of a spending review stories have appeared about departmental budgets. That's just a fact of political life," said the official spokesman.

"What has to be remembered is that far from cuts, the 2002 spending review has delivered the biggest increases in defence spending in 20 years," he said.

"We have met the costs of the campaigns in Iraq, Afghanistan, Kosovo and Sierra Leone as well as the war on terror. We are ensuring, and will continue to ensure, that our armed forces are best equipped to do the difficult job we ask of them."