Although fiercely and self-professedly Thatcherite on economic policy, Mr Clarke went out of his way to set out the 'hard centre' of Conservatism by pledging that an efficient and market-minded welfare state played a vital role in the lives of natural Tory supporters.
The Chancellor was forced to interrupt his speech and leave the podium for almost half an hour after slogan-chanting protesters burst into the auditorium at the London School of Economics. His speech to the Social Market Foundation, stressing 'an enlightened Conservatism which promotes civic bonds' marks the latest salvo in the new battle of ideas between the expected new Labour leadership and the Tories, and came on the eve of a big speech by Mr Blair on the modern welfare state.
While reasserting Tory belief in tax cuts and progressive reduction - to below 40 per cent of GNP - of public spending, Mr Clarke said: 'We still have to persuade the people that as Conservatives we know that free-market principles can be a means to an end but never an end in themselves.'
Mr Clarke said that the pace of economic and industrial change created 'anxieties'. He was not advocating 'featherbedding' Middle England. He added: 'I am simply arguing that it is idle to think that Middle England does not sometimes feel worried. Only Conservatism can address that concern.'
Mr Clarke said that a private or public-sector middle manager who found that his organisation was being 'de-layered' or 'downsized' 'will want to feel there is a high quality health and education system on which his family can depend'. He added: 'He will want to know that there is a modernised affordable welfare system which will assist him to retrain and to find new employment.'
Gordon Brown the shadow Chancellor, claimed last night that the speech showed 'the Tories are now panicking in the face of renewed confidence on the left'. He added: 'The smell of fear of a more assertive and changed Labour is in every line and the trumpet of retreat from the 1980s is sounding loud and clear.'
Mr Blair will today refer to the 'anxious middle classes' and say the welfare state has to be modernised and measured by the quality of its services as well as by cash.
He will argue that this will appeal to the enlightened self-interest of the wider public and that welfare should provide 'a springboard to success and not entrench dependency'.
A large welfare budget was not the measure of socialist success but of economic failure, he will argue.
In another speech, David Hunt, Secretary of State for Employment, warned against 'continuous Mao-style revolution'.