A Tory free vote on the euro is a desperate act

The Chancellor was surprised but then Mr Major took himself by surprise as well

On one thing, we can all be agreed. The explosion of the Tory party divisions on Europe over the last two days has been a defining moment of the election campaign. It is important not just because Britain's relations with Europe and the single currency are vital to the election debate, but, crucially, because of what it tells us about the Conservative Party and its fitness to govern.

It is remarkable that the issue which has come to dominate the Tory campaign - the single currency - is one on which there is a large area of agreement between the party leaderships. Like most people in the country, John Major and I both agree that it is sensible to be part of Europe, because withdrawal would spell economic disaster for Britain. We both agree that it is sensible to keep Britain's options on joining a single currency open until we know the economic circumstances of the time. Entry for Britain in the first wave is looking highly unlikely, and the starting date of 1 January 1999 is looking increasingly ambitious. Nevertheless, to rule out options now would ensure that our negotiating position was weakened unnecessarily. We may decide that EMU is not for us, but it is impossible to say until we know the conditions which operate at the time. Lastly, we both agree that if the Cabinet of the day does propose to enter EMU, the final choice should be left to the British people in a referendum. It would clearly be a decision of considerable political and constitutional importance and it is right that such a decision is ratified by a clear expression of political consent.

The political argument between the party leaderships on the single currency is not therefore about large disagreements on matters of policy. The simple difference is one of leadership. John Major is absolutely incapable of enforcing his view on large sections of his party or even on his own Cabinet. His failure to do that has ensured that an unedifying free-for-all is the result. The clarity with which Mr Major explained the rationale for the wait and see approach to the single currency is made meaningless by the fact that up to 200 of his candidates take a completely different approach, hostile to government policy. And the bravery for which he was praised yesterday - by, among others, The Independent - would be more convincing if he had faced down his Eurosceptic MPs with more conviction over the last two years, rather than let them dictate policy.

Mr Major's inability to persuade his party of the need to stay at the negotiating table means that there are effectively two Tory parties. Voters have no idea which one will be making the decisions if they are re-elected. Will it be the party of Ken Clarke and Michael Heseltine or that of John Redwood and Michael Portillo? If John Major decides that British interests are best served by entry, will he be able to take his party or even his Cabinet with him? Would he even be leader at the time of such a decision?

Mr Major's decision to offer a free vote to his MPs on the issue yesterday was the latest in a series of desperate concessions aimed at disguising his weakness within the Conservative Party. It is an admission, just two weeks from the election, that the party is in a state of civil war. Kenneth Clarke's revelation that he was not even consulted about this confirms that Mr Major has simply been making it up as he goes along. The Chancellor was surprised to hear what Mr Major said, but then Mr Major probably took himself by surprise as well. A free vote on the issue of monetary union amounts to a government admission that they cannot agree amongst themselves.

The issue facing the country at this election is about which party will get the best deal for Britain in Europe. Labour will offer constructive engagement and will defend Britain's interests. Our approach to a single currency, and all other European decisions, will be based on an assessment of what is necessary in the interests of the country, rather than what is possible in the politics of the party.

The Conservative Party has shown itself to be simply incapable of fighting for Britain in Europe. Their failures over BSE and fishing have been a direct result of their internal divisions, which have made Britain's negotiating position intolerably weak.

This week has been as dramatic as it was predictable. The divisions of a weakly led party have become irreconcilable fault lines. Nobody can now claim that this election is of no importance. A re-elected Conservative government simply could not lead Britain. Britain, truly, deserves better than this. Under Labour it will get it.

And while the Tories implode over Europe we will continue to set out policies in the other areas of real concern to the British people - jobs, crime, education, health. Just as they are divided on Europe, so, if the Tories get back, divisions will emerge in these areas too. They are an ungovernable party, unfit to govern.