Clarke toes single currency line

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The golden rule of Tory policy was that taxes would only be cut when it could be afforded, Kenneth Clarke, Chancellor of the Exchequer, said yesterday.

He told the Conservative Party conference in Bourne-mouth that sticking to that rule was an essential prerequisite for earning and keeping the trust of the British people.

Labour immediately denounced Mr Clarke for saying that the Tories were instinctive tax-cutters - having introduced 22 tax increases since the 1992 election, including the imposition of value-added tax on domestic power and fuel bills.

Mr Clarke said that the successful economies of the modern world would be the low- tax economies. But he added: "Affordable tax cuts are good for the economy. Unaffordable tax cuts can only damage the economy." That was why the key to tax cuts in next month's Budget was tight control over public spending, while ensuring that priority areas like schools, hospitals and the police were properly funded.

However, the main focus of the Chancellor's speech was the section dealing with the European single currency - the ultra-sensitive area that left the Tories so damagingly divided up to the conference season.

Mr Clarke told representatives that there was more that united them than divided them on Europe. They all supported a partnership of nations, the single market, free-market economics, budget-cutting and the fight against fraud.

They all opposed a United States of Europe, the social chapter, protectionism and over-regulation.

Sticking rigidly to the agreed Cabinet line, the Chancellor said: "We have business to do in Europe, and we must therefore play a powerful part in determining how business is to be done in Europe.

"It is no good creating a modern enterprise economy in Britain, if we do not defend the interests of that enterprise economy in Europe.

"Now economic and monetary union is on the agenda. The Prime Minister and I intend to be there, talking about it, influencing it, and defending the interests of the British economy. If a Euro-zone is created in the middle of our single market, we will be directly affected, whatever choice - in or out - we make on membership.

"The Prime Minister was absolutely right to say: 'For us to opt out of the debate now would be a dereliction of responsibility.' It is in Britain's interest to keep our options open.

"When we do decide, Britain's choice will be free. By staying in the game, we sacrifice nothing, and we gain much. At every stage, we have the right to say no."

If it was decided to join the single currency in the next Parliament, there would be a referendum, he said.

Mr Clarke then added his voice to the appeal for unity, saying: "Let us spend the next six months and the election uniting behind that policy, attacking the Labour Party, talking about the economy, and winning the next election."