Leading Article: Hopes rest on Kenneth Clarke

IN APRIL last year the Conservatives were, contrary to most expectations, re-elected for a fourth term, with a reduced but seemingly viable majority. At last John Major had his own mandate as Prime Minister. Little more than a year later, he has bowed to overwhelming pressure for a cabinet reshuffle after one of the most catastrophic periods in post- war British politics.

Its nadir came last September, when the pound was humiliatingly ejected from the European exchange rate mechanism, taking with it the heart of the Government's economic and European policies. In almost every other sphere, the record has looked equally dire. Although it can now be seen that the recovery began soon after that election victory, the economy failed until recently to fulfil the persistently over-optimistic expectations of Treasury ministers. Unemployment rose, house values went on down, repossessions multiplied and more and more mortgage-holders were caught in the trap of negative equity. On proposed mine closures, on unit fines and on school tests, senior ministers were forced to execute humbling reversals of policy.

In the Commons, the Tory party suffered its most open division since the Second World War over the Maastricht treaty. Finally, just as economic recovery became clearly established, house prices began to level off, unemployment began to fall and the end of the Maastricht agony was in sight, the Government's budget deficit was found to have reached unacceptable dimensions. And so the deeply unpopular task began of finding items of government spending that could be cut.

It is at this moment that Mr Major has decided to drop the man most closely identified with the Government's failures. Norman Lamont has been guilty of two politically unforgivable sins. When the heart was torn out of his economic strategy last autumn, he took exasperatingly long to come up with a half-credible alternative. If that performance threw into relief his intellectual inadequacy, his perennial inability to inspire confidence was more or less permanently on view. His deficiencies as a communicator, especially apparent on television, were compounded by what looked like failures of judgement: notably, in accepting Treasury money to pay legal expenses for evicting a 'Miss Whiplash' from the basement of his Notting Hill house, and in seeming not to have his Access bills under control. His chief value was as a lightning conductor for public dissatisfaction.

Now, belatedly, he is gone. Mr Major's decision to promote in his stead Kenneth Clarke, the man most likely to succeed him were he to depart prematurely, can be seen as a sign of confidence. The Prime Minister must reckon that Mr Clarke will be robustly effective, the Government's stock will rise briskly as the recovery gathers pace, he himself will remain at No 10 and the Tories might even win a fifth term. What matters is that Mr Clarke is much the best man for the job. Mr Major deserves credit for giving it to a man likely to outshine him. To have put Michael Howard at No 11 would have been seen as a sop to the dissident right. To have opted for John MacGregor would reasonably have been regarded as playing for safety.

Mr Clarke is the right man for several important reasons. First, he comes from the liberal wing of the party and has served as Secretary of State at two big- spending departments, health and education. He will thus be well placed to wring reductions in spending from ministers producing bleeding-heart arguments to defend their budgets. Yet

those same ministers are, in broader terms, likely to be heartened by his

appointment.

Second, he is a convinced European. There was something utterly contradictory in Mr Major proclaiming that he wanted Britain to be at the heart of Europe when his own Chancellor, Mr Lamont, made little secret of his lack of enthusiasm for the European idea in general and economic and monetary union in particular, thus giving heart to the anti-Maastricht rebels of his own party. In Mr Clarke Britain has a chancellor who is both intellectually and emotionally convinced that this country must play a full role in the evolution of a united and closely co-operating Europe.

Finally, Mr Clarke's personal strengths can be deployed to evolve and support policy in the single most crucial field. He is unmatched for resilience and robustness. It is hardly surprising that his ability to spring to the Government's defence when it has seemed to be on its knees has been in heavy demand over the past catastrophic year.

It is hard to feel anything other than gloom, however, at the other significant promotion: that of Michael Howard to the Home Office. Mr Howard, too, has prime ministerial ambitions. His supporters come unequivocally from the right of the Conservative Party. It is true that in the last two votes (in the late Eighties) on the litmus-test issue of hanging, he voted against a resumption of capital punishment.

It is also true that as Home Secretary, Mr Clarke often seemed more populist than genuinely liberal. He recently yielded somewhat precipitately to pressure from the right to restore the freedom of magistrates and judges to give longer sentences. Equally, Mr Clarke backed off from plans to merge police forces and to give London's Metropolitan Police, at present answerable to the Home Secretary, an independent authority. More seriously, he has failed to change illiberal Home Office policy on refugees from former Yugoslavia.

But Mr Clarke has had the courage to institute root-and-branch reform of police disciplinary procedures and the structure of the service - a field in which his successor is unikely to relish taking on the formidable police lobby. Mr Howard may, like an earlier man of the right, David (now Lord) Waddington, prove readier than expected to side with the reformists. He will be closely watched for signs that he is using the law and order issue to boost his standing as, in terms of leadership material, the antithesis of Mr Clarke.

Of the other cabinet changes, the translation of John Gummer from agriculture to environment suggests a sad dearth of heavyweight talent. As his successor, Gillian Shephard, will have a chance to shift the ministry's emphasis from producers to consumers. David Hunt's move from Wales to employment brings another convinced European to a major department. As for John Redwood, it was an ingeniously perverse touch to give the Welsh Office, long associated with economic interventionism, to an ice-dry Thatcherite. But it is the shift at No 11 that really matters. In default of policies that catch the public imagination, Mr Clarke represents Mr Major's best and perhaps last hope of rescuing his government's reputation and fortunes.