Forget about the Treasury's five tests for joining the euro – the fact is we can't do any such thing until we solve the undersupply of housing. This is why...
When, as expected, chancellor Gordon Brown announces that Britain is not yet ready to join the euro, he will place heavy emphasis on the housing market's volatility as a reason.

Nevertheless, actions he has taken already should leave nobody in any doubt as to the strength of his commitment to join, if conditions are right. The question is whether his solutions will be deliverable – or whether there is a bigger political agenda that will ensure that the housing market permanently blocks euro membership.

The problem is, every time the economy picks up, particularly in a low-interest, low-inflation climate, the market booms, fuelling consumer expenditure and threatening runaway inflation. The Bank of England's Monetary Policy Committee watches the housing market like a hawk, and at the first sign of an upturn, it may need to raise increase interest rates to stop the housing juggernaut derailing the economy.

Such a local issue would, however, be beneath the notice of the European Central Bank; it would be quite likely to reduce interest rates just when the UK market conditions demand an increase. The consequences, Brown believes, would be disastrous – hence his "not yet" verdict.

In his Budget speech, the chancellor anticipated the inevitable response from europhiles – "What are you going to do about it?" – by announcing the appointment of Kate Barker, a member of the MPC, to head an inquiry into the obstacles to increasing housing supply. He also announced that David Miles, professor of finance at Imperial College London, would look into less volatile funding for buyers to replace variable-rate mortgages.

Barker's enquiry is the more significant, because she is being let loose on a sensitive area of UK domestic politics – the inalienable rights of Nimbys to hold the UK economy to ransom. She will find evidence of substantial undersupply of houses in the most buoyant regions and, although the South-east is experiencing a price lull as growth in the economy falters, the long-term trend is clear. From an equilibrium between homes and households in 1980, 20 years of falling housebuilding rates has created a critical shortage that causes booming prices the moment growth resumes.

Kate Barker is being let loose on a sensitive area of UK politics – the inalienable rights of Nimbys to hold the economy to ransom

This is something even John Prescott has recognised: "We have seen an increasing demand for housing, but overall we are building 150,000 fewer homes today than we were 30 years ago. No wonder many cannot afford to live where they were born, in both urban and rural areas."

Policies restricting supply have created that situation, and the latest twist of the policy screw, PPG3, has directly contributed to a further decrease in output. Professor Michael Ball from the London School of Economics last month told the Society for Property Researchers that housing shortages came about when the laws of supply and demand failed to work because of the imposition of overly restrictive policies for the local environment, driven by a Nimby electorate. No better description of PPG3 exists, to my knowledge.

So will Kate Barker's inquiry clearly address the policy origins of the housing shortage and give Brown and Tony Blair guidance on the need, say, to change PPG3? Or will she feel such advice would be unwelcome, and have to come up with irrelevant technical recommendations about fiscal instruments?

It matters not one whit either way, because if you think Gordon and Tony had a falling-out over the euro, it will be as nothing compared with the one they'll have over any attempt to change the policies that Nimby built. Tony's heart is firmly with the South-east Nimby in his Ford Galaxy; he knows alienating that voter would be tantamount to writing his resignation speech.

And Brown can re-run his five tests, year-on-year, till hell freezes over, but the market will continue to obstruct euro membership, because the anti-development policies that create housing shortages are a political necessity for the survival of any government.