BRITAIN has rejected an EC report which calls for the eventual

abolition of the pound and economic power being centralised in Europe.

The report, recommending a gradual move to European economic and

monetary union, was drawn up by a 17-man committee, chaired by EC

President Jacques Delors.

It lays out a three-stage approach to a system under which most of the

functions of the Bank of England would be carried out by a new European

institution.

Chancellor Nigel Lawson rejected the main thrust of the report when it

was presented to EC Finance Ministers in Luxembourg yesterday, arguing

it would mean a United States of Europe and the end of sterling.

He noted that the recommendations of the Delors committee would

represent an unacceptable ''quantum jump'' towards European integration.

''The report makes it clear that there would have to be amendments to

the existing EC treaty,'' explained the Chancellor.

''It makes it clear too that there would be a transfer of sovereignty

to a new central institution. We have to say we do not want to reach

that objective.

''We cannot accept the transfer of sovereignty implied by the Delors

report, as economic and monetary union would require political union --

the formation of a United States of Europe.

''It would also involve the abandonment of sterling and other national

currencies and the establishment of a common currency.''

He gave a warning that Mrs Thatcher is prepared to use her veto

against the report when it is discussed by EC heads of government, and

emphasised that it can be adopted only by unanimity.

The report will be discussed by EC leaders at their June Summit talks

in Madrid.

''We will not see economic and monetary union in my lifetime,'' Mr

Lawson pledged.

The Delors report calls on EC Governments to commit themselves to

economic and monetary union before the end of this year, with work on

this to begin by the summer of next year.

However, it gives no date for completing the process.

As well as establishing a common currency, monetary union would

involve setting up a new European Institution gradually to take over the

role of national central banks.

This would be called the European System of Central Banks, and would

eventually be responsible for formulating and implementing monetary

policy, managing currency reserves and intervening on the exchange

markets.

Meanwhile, EC Finance Ministers would be empowered to interfere with

national economic policy, for instance by setting limits on budget

deficits.

President Delors admitted yesterday that it is impossible to rush

towards the objectives outlined in his report. ''I am not in favour of

fixing dates,'' he said. But decisions on principle are needed from the

EC heads of government this year.