The inquiry was ordered after the Daily Mirror handed the papers back to the Government. Disclosure could have caused speculation in the City and chaos in Treasury. Downing Street said the inquiry would be conducted by Sir Robin Butler, the Cabinet Secretary, and Sir Terry Burns, Permanent Secretary at the Treasury, "as a matter of urgency". The police may be called in later.
The documents had been touted around various newspapers over the last few days. Of the 36 documents, 33 were from the Inland Revenue, two from Customs & Excise and one from the Scottish Office.
Such leaks are unprecedented in modern times. Hugh Dalton was forced to resign in 1947 after divulging the main points of his Budget to an Eve-ning Standard reporter as he went into the Chamber. News of a tax on dog-racing was on the streets before the Chancellor reached it in his speech. He resigned the next day.
The leak threatens to embarrass Mr Clarke before he unveils the Budget package, and took the edge off a day in which he appeared to have succeeded in buying off Tory backbenchers. In his hastily arranged speech, he assured them that he will take no binding decisions on a single European currency before the Dublin summit in December.
Mr Clarke bought time, but the row with the Euro-sceptics was still simmering after his unprecedented statement to the House to prevent their anger on Europe overshadowing today's package of tax cuts and spending increases for health, schools and police which are intended to be the springboard for the Tory election campaign.
The Prime Minister, who will chair a meeting of the Cabinet to hear the Budget this morning, was not in the chamber to lend his support to Mr Clarke, but the Tory back bench was in subdued mood, and the threatened mauling of the Chancellor never materialised. Mr Clarke gave a clear signal that he wanted to make the statement or face a debate last week, but was stopped from doing so by the Prime Minister.
Mr Major met the "men in grey suits", the leaders of the 1922 Committee of Tory MPs, before the Chancellor made his statement to the packed House. Sir Marcus Fox, chairman of the 1922 Committee, told the Prime Minister there had been unrest among backbenchers at the refusal of the Government to concede a full debate on European proposals for a stability pact, which they feared could lead to Britain being forced to accept economic discipline from Brussels even if it remain-ed outside a single currency.
The backbenchers were also guaranteed there would be an extended Commons debate before the Dublin summit, although it is likely to be "on the adjournment", avoiding a damaging split on the vote.
The Chancellor's assurance to John Redwood, champion of the Euro-sceptics, was the turning point. Mr Clarke told Mr Redwood he would seek to amend the documents at the Econfin meeting to underline Britain's parliamentary "scrutiny reserve". They will be checking to ensure he fulfils his promises. The Tory Euro- sceptics remained unnerved by the Mr Clarke's commitment to keep open the option of a single currency.
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