Clarke gets tough as Tory axes grind

THE Chancellor, Kenneth Clarke, will this week issue a stern warning to Cabinet colleagues that tax cuts will only be achieved if ministers reduce their bids for public spending.

Mr Clarke, who will chair the first public-spending Cabinet of the year, will also raise his profile with two big setpiece speeches - one outlining his vision of conservatism - within the next month, at a time when speculation grows about Cabinet reshuffles and the ambitions of ministers.

Thursday's Cabinet marks the beginning of the annual battle over public spending and is expected to reaffirm the Government's commitment to containing it within a limit of pounds 251.3bn for the year 1994-5.

Mr Clarke's warning that tax cuts will depend upon constraining spending follows last week's Mansion House speech which indicated that reduction in taxes is some way off.

Some right-wingers are pressing for a reduction of the pounds 251.3bn target but Mr Clarke is expected to argue that it would be better to stick to current plans - and then demonstrate the Government's determination to control spending by falling short of it.

The Chancellor, whose profile will be further raised by the publication of two biographies and a BBC documentary, to be screened tonight, will address the Konrad Adenauer Stiftung (Foundation) in Bonn on 29 June. On 12 July, he will outline his personal vision of conservatism in a lecture to members of the Social Market Foundation at the London School of Economics.

Mr Clarke's leadership prospects may also benefit from the dismay felt by some Conservative loyalists at Michael Heseltine's apparent move to rule himself out as the next party chairman. Repeating his desire to stay at the Department of Trade and Industry, Mr Heseltine said yesterday on BBC Radio 4's Today programme: 'I am not some sort of a pawn on a chequerboard being moved about all over the place.'

Mr Heseltine's hint that he would reject the chairmanship, in the wake of Sir Norman Fowler's resignation last week, has angered some Tory MPs and stirred speculation about alternative candidates.

Ministers, including right- wingers, have begun lobbying against the favourite, Employment Secretary David Hunt, to take over at Conservative Central Office.

Last night, Lord Archer emerged as the Tory grass-roots favourite to become chairman. A poll of 100 constituency chairmen by the Sunday Express gave Lord Archer 42 votes, and Mr Hunt and Mr Heseltine 25 votes each. Virginia Bottomley won two votes, and six others secured one each. Meanwhile, Jeremy Hanley, Minister of State for the Armed Forces, is also emerging as a dark-horse candidate, according to ministerial sources. Mr Hunt remains favourite for the job but is thought to be unenthusiastic about it. Unlike Mr Heseltine, however, he would not be in a position to turn it down. Ian Lang, Secretary of State for Scotland, is thought to have been ruled out because he holds a marginal seat which will require him to be out of London campaigning in the run-up to the general election.

One Cabinet minister mentioned as a prospect for Smith Square is Gillian Shephard, the Agriculture Minister. She was a deputy chairman during the last election, and impressed MPs.

But some senior Tory MPs believe that John Major will look outside the Cabinet to Mr Hanley, the current deputy chairman, Gerry Malone - or even to Lord Archer.

The appointment of a new Conservative Party chairman will be part of a general reshuffle of the Government, affecting all levels. Baroness Blatch is expected to become leader of the Lords and Michael Portillo looks likely to be given his own ministry, perhaps Transport or Environment. Stephen Dorrell, Financial Secretary to the Treasury, Jonathan Aitken, a Minister of State at the Ministry of Defence, and Brian Mawhinney, the Health Minister, are tipped to enter the Cabinet.

Amid speculation that Mr Major will axe four Cabinet ministers in order to his reassert his authority, names being mooted as casualties are Peter Brooke (Heritage), John MacGregor (Transport) and John Patten (Education). William Waldegrave, Secretary of State at the Office of Public Service and Science, may be saved because his departure would seem to pre-judge the outcome of the Scott inquiry. Others who might be eased out include the Leader of the House of Commons, Tony Newton, and the Secretary of State for the Environment, John Gummer, both reliable performers without having made a big impact.

The Cabinet 'bastard' being targeted by left-wingers is Peter Lilley (Social Services), who has been criticised for failing to support his junior ministers on issues such as the Child Support Agency.