Tony Blair has endorsed the launch on Thursday of the "Yes" campaign by prominent businessmen, which he hopes will keep up the momentum towards British membership after he unveiled a national changeover plan two weeks ago.
Kenneth Clarke and Michael Heseltine, the most prominent pro-European Union Tory MPs, will not join the Britain in Europe campaign until after the European Parliament elections in June, in an attempt to limit Tory divisions ahead of the poll. But they have promised to play a leading role after the elections, when a full-scale Yes movement will be launched.
Lord Howe's immediate involvement as an "observer" on the group's board will anger Tory Eurosceptics. Some MPs may demand that he be deprived of the party whip.
The Britain in Europe group will run an information campaign during the Euro elections to counter Tory attacks on the single currency. The group insists it will produce "factual and politically neutral" material.
Britain in Europe will be chaired by Lord Marshall, the British Airways chairman and former president of the Confederation of British Industry. Other prominent businessmen will include Lord Hollick, chief executive of United News and Media, Colin Sharman, chief executive of KPMG International, and Niall FitzGerald, chairman of Unilever.
"We believe Mr Blair came off the fence, now we are doing the same," said one organiser. The board will also include Giles Radice, the Labour MP who chairs the European Movement, and Michael Welsh, director of the Tory Action Centre for Europe, who will act as Mr Clarke's "eyes and ears".
Mr Hague's allies have threatened to expel Tories who endorse a breakaway Pro-Euro Conservative Party launched by two MEPs, John Stevens and Brendan Donnelly.
But Mr Hague is unlikely to discipline Lord Howe. "We will let party members make their own judgement; he will weaken his own case in the party by parading his views before the Euro elections," one Hague ally said last night.
Friends of Lord Howe insisted he was doing nothing wrong, since Mr Hague had promised supporters of the euro would remain free to state their views when Tory members backed the leadership's hard line in a ballot last autumn.
Lord Howe dismissed speculation that Europhile Tories would support the rebel pro-euro candidates in the June poll. But he said he was "saddened" by the departure of Mr Stevens and Mr Donnelly and understood their reasons. He warned that their resignations "should send a clear and sombre signal to our party leadership".
However, the Prime Minister's statement has persuaded Mr Hague to risk another outbreak of Tory disunity by making the single currency a key issue in the Euro election. Yesterday Mr Hague set up a commission to investigate the positive case for Britain retaining the pound, to be chaired by Sir John Nott, the former defence secretary.
Mr Clarke said: "I don't think the European elections should be about the euro. If the Conservative Party makes it about the euro, it's making a serious mistake." He accused Mr Hague's aides of "advertising Tory divisions" by claiming he would support the rebel Tories, which was "nonsense".