The Labour leader wants a quick replacement for Clause 4, which commits the party to nationalisation. A special conference to approve a new version could be held as early as Easter. Mr Blair has also asked for work on tax, employment and welfare policiesto be stepped up for a Labour manifesto.
The Labour leader is concerned that his party could be caught out by a snap election - perhaps after a change of Prime Minister next year.
Tory troubles were increased yesterday by another poll showing that the Government is set to lose the Dudley West by-election on Thursday by a huge margin. The poll, for GMTV's Sunday Programme, showed Labour with a 44.8 per cent lead. At the 1992 general election, the late Dr John Blackburn retained the seat for the Tories with a 5,789 majority.
At the European Council summit in Essen, Douglas Hurd, the Foreign Secretary, said that he wanted a debate that recognised the benefits as well as the disadvantages of a single currency.
But at a dinner for heads of government on Friday night Mr Major struck a much more Eurosceptic tone. It was doubtful, he argued, that the 15 member states could achieve the convergence criteria necessary for a single currency by the end of the century.
He added that the EU's objectives were no longer clear and that it had lost touch with ordinary people. On Radio 4's Today programme, Mr Major gave the Eurosceptics in his party further encouragement. The timescale for the introduction of a single currency, set out at Maastricht, was not going to be met, he said. He added: "I have not ruled out the prospect of a referendum".
His comments increased speculation that the eight Euro-rebels who lost the Conservative whip may soon be re-admitted to the parliamentary party. Several MPs welcomed what the Prime Minister said. One Euro-sceptic leader, Sir Teddy Taylor, MP for Southend, described it as "a step in the right direction". Sir George Gardiner, MP for Reigate, added:"We should all make some concessions to restore our parliamentary majority and party unity and wipe the slate clean of the catastrophes of the past fortnight. We on the right will do all we can to aid that process. With a little more generosity all round, we can get the Tory Party back on the road.''
However, one rebel, Michael Cartiss, said the Prime Minister's move to postpone a single European currency beyond 1999 was " not an olive branch".
It was simply a recognition of practicalities. Another rebel, who declined to be named, said "they need us more than we need them" and called for Mr Hurd's removal from the Foreign Office.
"Douglas is not going to break any china. We need somebody to carry the Union Jack into Brussels and if necessary be prepared to break crockery."
The Tory turbulence over Europe will heighten Mr Blair's desire to prepare his party for an early election. He thinks the party's policies need much more work before it puts its case to the country. Tax reform is one area where Mr Blair wants to speed uppolicy-making, adding more detail to Labour commitments to close abuses and loopholes and to review corporate and environmental taxation.
He also wants to develop policies for job creation and the information super-highway and for improving standards in education Candidate selection, which has been delayed by the Boundary Commission, will also be given priority and Labour aims to have candidates in position in all key marginals in a year's time. Early in the New Year the party leadership will appoint advertising and polling agencies.
Mr Blair believes that the Government defeat over VAT has given the Opposition a chance to neutralise taxation presented as an anti-Labour issue. Labour will argue that, if the Tories ever gain a large enough majority, they will impose VAT on fuel at thefull rate.
Inside Story,pages 16-17
Alan Watkins, page 19
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