TONY BLAIR has vowed to block any attempt by Brussels to restrict Britain’s control over tax and social security policy under the new EU constitution, no matter how long the negotiations take.

In a significant hardening of his rhetoric on Europe, the Prime Minister used a speech to business leaders to issue a stern warning to other EU members, telling them that their fixation with regulation and harmonisation had to end.

A coalition of reform-minded countries, due to hold the six-month revolving EU presidency over the next two years, would make job creation and modernising labour markets their priority, he said. Italy, the Irish Republic, the Netherlands and Britain would join forces to challenge the belief that the answer to every social problem was more red tape.

On the constitution, he said that none of Britain’s “red lines” would be breached and the constitution would not be agreed if any were in doubt.

His speech, made to the annual conference of the CBI, signalled the Prime Minister’s growing frustration over the slow pace of change in Europe, and fears that the new constitution will be deeply unpopular with business and the public.

In previous speeches, Mr Blair has chosen to highlight the positive aspects of the constitution, saying it will make decision-making more efficient and streamline the institutions. Yesterday his tone was closer to Gordon Brown’s.

The Chancellor has given warning that the new constitution could lead to a federal Europe and an erosion of national sovereignty. The business community, one of the most pro-European constituencies in the country, has also voiced its fears. They are anxious that the new document will result in another deluge of red tape and rob Britain of its powers to block economic initiatives from Brussels.

Mr Blair’s senior advisers believe that the negotiations surrounding the new constitution could turn into a bloody affair, with Britain likely to come under immense pressure to give up its veto on tax, social security or defence to prove its pro-European credentials and reach a deal.

Mr Blair said yesterday that this would not happen. “I want to be clear. We will not yield up any of our crucial red lines in the forthcoming negotiations. Specifically on the matters of tax, social security and the EU budget, we oppose any move away from unanimity,” he told the CBI.

“Within Europe, Britain is a low-tax country and I am adamant we will remain that way.” He said he was prepared to take his time to get it right. “If it is a lengthy negotiation it will be a lengthy negotiation,” he said.

He also promised the new charter of fundamental rights would not leave the way open for Brussels to interfere with Britain’s employment laws and he would not agree the new constitution until that has been safeguarded.

Negotiations over the new constitution began in October and are due to be completed by next spring. British businesses have been complaining about the new regulations the EU is about to unleash, including new rules on agency workers and working hours.

Mr Blair said that he understood their frustration. The EU had to put jobs and competition at the top of its priority list, rather than workers’ rights. “We need a proactive approach to competition and opening markets. We need a new approach to regulation, one that overcomes the instinct to regulate and harmonise,” he said.

Digby Jones, Director-General of the CBI, welcomed the Prime Minister’s reassurances. “There are too many EU politicians who reach for the regulatory stick before considering the damage it will do.

“British business will be four square behind the Prime Minister as he tries to change that. He is right that we must engage with Europe but we also need to punch our weight,” he said.

Mr Brown will address delegates today and is likely to focus on the value of the special relationship with the US on the occasion of President Bush’s state visit.

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