Tony Blair could face a major stumbling block in his plans to hold a referendum on the euro after the new leader of one of the UK's biggest trade unions threatened to hold a ballot of its members on the issue.

Derek Simpson, who ousted Blair ally Sir Ken Jackson as leader of Amicus last month, is set to question whether the 750,000 member engineering union should continue to support the UK's entry into the single currency.

I want the union's money spent on the members, not euro propaganda

Derek Simpson

The left-wing union official, who would have to gain the support of the executive for a ballot, takes over from Sir Ken in January.

If Mr Simpson, a former communist - described as euro-agnostic - won the backing, he would have to overturn membership support for signing up to the euro, which a union spokesman claimed was "fairly overwhelming".

Such a change in stance would be a bombshell for the euro pressure group Britain in Europe, which relies on Amicus support.

Lost ally

It would also be a major blow for Mr Blair, who had until now been able to depend on trade union support.

Sir Ken's pro-euro support has been crucial to the prime minister, as much of the UK is opposed to joining the single currency.

As the leader of a major union representing thousands of workers, Sir Ken has often warned of the threat to manufacturing industry should the UK remain outside the single currency zone.

Mr Blair faces a showdown at the TUC conference

The government has said it will announce whether or not the UK meets its five economic tests by June 2003

Mr Simpson has said he would audit the amount of money given to Britain in Europe because Amicus members had "no idea" how much they were handing over.

Spending concerns

"I want the union's money spent on the members, not euro propaganda," he said.

He told BBC Radio 4's World At One: "It would be my view to try to establish what our members' view of the euro was in order to ensure that our policy reflects their position.

"Is it appropriate to be spending money in supporting a particular campaign - how much money are we spending?

"I am confident at the end of that process that we will have a proper position on the euro, which may confirm our existing position, but doesn't exclude the possibility that it would be something different.

"I certainly question spending money on something that our members, first of all, didn't know about, secondly, didn't agree with and money that could be spent on things that relate to benefit directly for the members.

"I don't necessarily subscribe to the view that our members would want us spending their money in this way."

Losing support?

Mr Simpson said whichever way the ballot went, it might be "prudent" for the union to consider not supporting either side of the debate.

A spokesman for Amicus said: "Derek Simpson was speaking in a personal capacity, as this union is Britain in Europe's biggest donor."

A spokesman for The No Campaign said an ICM poll in September 1999 of 500 trade union members showed that 66% of the AEEU members were against the euro, while 24% were in favour of it.

George Eustice, director of The No campaign, told The Times: "This is a major blow to the government's hopes of taking Britain into the euro.

"The euro lobby is rapidly losing the support of the trade union movement as members start to focus on the damaging impact it would have on jobs and living standards."