Baloney, nonsense - and the truth about Ken Clarke

The Chancellor's huge strength as an electoral asset depends on his credible language. People believe him

It was always going to be the most difficult debate of the week. Kenneth Clarke faces the Tory conference this morning having worked harder on his speech than in any previous year. But is the party ready to listen? How they receive him will test to destruction whether the Tories still have a will to win.

In the illusionist world of Tory right-wing demonology, Kenneth Clarke is hopelessly committed to the big state, likes taunting his opponents with his distaste for unaffordable tax cuts, and is all too dismissive of calls to reduce spending to well below 40 per cent of national income. The reality could scarcely be more different. In the actual, rather than the rhetorical, Cabinet battle, the roles are reversed. Clarke's current struggle to cut spending to make room for tax cuts is meeting some of the stiffest resistance from those most ideologically opposed to him - Peter Lilley at Social Security, Michael Portillo at Defence and Michael Howard at the Home Office.

In the illusory world, these ministers are state shrinkers to a man; in the real world they run big spending departments and are fighting for their budgets against a hard-nosed Chancellor who wants to contain them. It's a pretty safe bet that Clarke will today specify education, health and police as the main exceptions to his determination to bear down heavily on spending. That doesn't, for example, leave much room for the expansive prison building programme to which Howard is personally committed.

To square this circle some elements of the right have a new and more sophisticated story. Clarke wouldn't be as irritatingly orthodox about the tax and spending equation in the run-up to the election if he didn't have a secret agenda - to bring down Britain's budget deficit to three per cent of GDP simply to meet the Maastricht criterion for EMU membership.

This, too, is baloney. Clarke is confident that Britain is at least as well placed to meet the terms as its other big partners. If the European economy prospers and grows, Britain's will too. If it doesn't, then Germany and France also are going to be in deep trouble. In fact Clarke's reasons have everything to do with the British economy. A large part of today's speech will no doubt be devoted to arguing - with some justice - that it is a generation or more since a government has entered an election with such good economic prospects. But debt interest is currently costing more than the entire defence budget. Britain's debt to GDP ratio, at around 53 per cent, is well below the EMU criterion of 60 per cent. The reasons he wants it to start falling are entirely domestic.

But the campaign against Clarke over the single currency isn't illusion- free either. It isn't an illusion that he would like to see Britain in a single currency - though he means it when he says that he could oppose entry if the Franco-German axis decided to fudge Maastricht in order to force through EMU for political reasons before their economies are ready. As it happens, the cheekiest part of the BBC interview which so irritated the Euro-sceptics wasn't his loosely worded gibe that it would be "pathetic" to rule out now British EMU entry in the first wave. It was the virtually unnoticed implication at the end of it that Britain would have to decide after the election between joining the first-class countries in EMU or staying with the second-class countries outside it. But it was scarcely surprising that he bit back. The Eurosceptics had broken the truce agreed in April. What's more, as the more sensible sceptics see, Kenneth Clarke's huge strength as an electoral asset depends on his credible use of language about the economy. Because he speaks candidly - if sometimes loosely - people believe him. He can't speak like a human being on the economy and like a robot on Europe.

No, the most dangerous illusion is that the issue can be re-opened between now and polling day without terminal damage to the Tories' electoral hopes - hopes which after yesterday's impressive show of unity ought to be flickering back into life. The illusion takes many forms. One is that Major will declare his personal opposition to a single currency in his election address - the so-called Huntingdon declaration. To understand how suicidal that would be, imagine this one question to Clarke on the stump: "Do you agree with what the Prime Minister says in his election address?" Forget it. Another is that for the Government to rule out a single currency would suddenly guarantee election victory. This week's Gallup poll for the Daily Telegraph showed majority support among voters - including Tory voters - for keeping the options open. And the third is that it won't be credible to go through the election with an open mind because the EMU decision will be only "weeks" away. There is considerable debate about EMU timing within the Treasury. An extreme view is that Britain could signify its decision as late as 1 January 1999. But even if that is unrealistic, it's now likely that the timetable will slip by several months. And with it the obscure stipulation in the Maastricht treaty that Britain "may" indicate its decision to join by the end of 1997.

There were clear signs yesterday of the Tory party gradually beginning to reassemble itself as the formidable electoral machine it is. The signal success of John Major's face-to-face conversation with the conference is one. The warm reception Malcolm Rifkind got for his courageous warning that it would not be in the national interest to rule out EMU is another. If the conference sticks to this form it won't turn today's economic debate into a bear garden. The party will have kept alive a glimmer of hope that against all the odds it could still win. But for how long?