Tory centre ground fights back

PATRICIA WYNN DAVIES

Political Correspondent

Centre-ground Tories moved to rebuild their fortunes yesterday with the first of a series of papers aimed at stemming the Conservative Party's drift to the right.

The essays, written by members of the Macleod Group of "One Nation" Tories, came despite the efforts of Conservative Central Office to block publication of what could be taken to be an alternative left-of- centre "manifesto".

The most provocative contribution so far comes from Quentin Davies, the MP for Stamford and Spalding, in a paper published via the Conservative Group for Europe praising the benefits of a single currency.

Two other papers published through the Tory Reform Group - on education, by Malcolm Thornton MP and industrial policy, by Patrick Thompson - are less controversial in themselves. But the exercise as a whole is intended to be a key part of a campaign for the Tories to be the party of moderate policies, appealing to the middle ground of British politics.

Mr Davies declares in his paper that the "prospective attractions of a single currency are momentous. We would willingly have paid a high price indeed for shelter from the currency crises which have beset us intermittently, and very destructively, over the past 30 years when we were experiencing them - though memories are short."

But all the benefits, substantial though they were, were "almost eclipsed by the stability and cost-of-capital attractions of a single currency". Mr Davies insisted yesterday that interest rates would be lower if the pound were part of the single currency. "As a result the average household would be pounds 10 a week better off."

The MP argues in the paper that international financial markets remained fearful of the tendency to devalue, so real interest rates had to be higher. "The cost to the taxpayer of the risk premium demanded by the markets is . . . of the order of pounds 5.7bn per annum, or three to four pence on the standard rate of income tax."