Euro row hits Clarke's upbeat appeal

COLIN BROWN

Chief Political Correspondent

Conservative Euro-sceptics were in open revolt against the Chancellor last night over the single currency in a row which threatened to overshadow his promises of economic recovery.

John Major will return from the Far East tomorrow under growing pressure from his Cabinet colleagues to settle the rift by backing a referendum on a single currency next week when a European White Paper is published.

Kenneth Clarke yesterday infuriated the Euro-sceptics by strengthening his opposition to a referendum. Some Cabinet ministers, who are due to discuss the White Paper on Thursday, said Mr Major should overrule the Chancellor, in spite of the risk of it forcing his resignation.

"I can't see why Major does not agree to a referendum. It is absolutely inevitable. I think something will be said alongside the White Paper to make it clear there will be a referendum," one Cabinet source said.

John Redwood, the former Cabinet minister, writing in The Independent today makes it clear that the single currency is the biggest issue facing the Government. Mr Clarke said a referendum would be considered when Britain considers joining a single currency.

Mr Clarke was blown off course by the clash with his own backbenchers, in a Commons debate in which he had planned to boost Tory morale with the prospects for a consumer-led boom, fuelled by some of the pounds 20bn from maturing Tessa tax-free savings plans.

Appealing to Tory voters with an economic assessment verging on "you've never had it so good", Mr Clarke said "Middle England" would see real improvements in its standard of living, with greater prosperity and more jobs "without a return to boom and bust". Britain faced the "the most attractive economic prospects for a generation", the Chancellor said.

"There are great bargains for first-time buyers ... The spring of 1996 could be a good time for the housing market," he said. His remarks, three days before his meeting with the Governor of the Bank of England, were seen as a clear signal of a further cut in interest rates.

But his optimism failed to quell Euro-sceptic MPs who were furious at an interview in which he warned that Britain could expect to pay higher interest rates than Germany and France without a single currency. He was attacked as "crackers" by Teresa Gorman, one of the former whipless Tory MPs. Bill Cash, a leading Euro-sceptic, angrily told Mr Clarke millions of voters were opposed to a single currency.

Senior Conservative sources said Michael Portillo, the right-wing champion in the Cabinet, was against a commitment to a referendum because he feared he would have to resign from the Cabinet in order to fight for a "no" vote.

The Tory centre-left Macleod Group will back the Chancellor tomorrow in a policy paper - exclusively forecast in The Independent - calling on the Government to keep open the option of a single currency.

Inside Parliament, page 8

Leading article, page 14

John Redwood, page 15