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We can't rely on economy - PM

Warring factions on the Tory backbenches and in the Government were warned by John Major yesterday that divisions in the party could cost it the next general election.

In his strongest appeal for party unity so far, the Prime Minister said the Government could not depend on economic recovery alone to win the election. He sought to get the Government off the defensive over rebellions on Europe and VAT on fuel with a savage onslaught on Labour's plans for devolved assemblies in Scotland and Wales.

Attacking Labour's plans as ''teenage madness'', Mr Major told the Conservative Women's Conference in London that devolution would mean ''the beginning of the end of Britain'' and put the unity of the United Kingdom at risk.

Urging the party to ''put the divisions behind us,'' Mr Major said the grassroots constituencies longed for unity ''from the parliamentary party and the Government''.

This clear admission of divisions among ministers came as Jonathan Aitken, the Chief Secretary to the Treasury, said a defeat for the Government by Tory rebels on VAT on fuel on Tuesday would knock a pounds 1.5bn hole in the Budget arithmetic and would be ''badly received by the markets''. The Chancellor, Kenneth Clarke, and Mr Aitken are meeting the potential rebels to head off a revolt.

Mr Major avoided any direct mention of the VAT issue, but warned: ''No one should be so blithe as to assume that a strong economy alone will win us the next election.'' In a call to constituencies to put pressure on the rebel Tory MPs, he said: ''The Labour Party cannot beat us. We can beat ourselves and you must make sure we do not.''

Mr Major defended the removal of the whip from nine Tory MPs and the decision to turn the vote on the European Finance Bill into a confidence issue. He said he had given his word as Prime Minister and reneging on it would mean Britain would no longer be believed in the forthcoming negotiations in 1996 on the future of Europe.

As Mr Major was speaking, however, a fresh Euro-row broke out after it emerged that David Heathcoat-Amory, the Paymaster General, had quietly agreed to slash nearly pounds 4m off the projected pounds 100m anti-fraud budget for 1995 at a Brussels meeting last month, while publicly attacking spending abuses.

Bill Cash, an arch-Eurosceptic, said it was another example of British sovereignty being undermined, as Labour tabled fraud-related amendments to the Euro-budget Bill.