Bournemouth versus the Square Mile

THE FLOOR of the Commons is a nice, clear dividing-line. It cuts the ruling party off from its opposition foes. Across that dusty green line, national leaders joust. This is a politics we can all understand - a living, blatant caricature of the power struggle. But it is also grossly misleading. Though Europe dominated the first Blair-Major exchange, the real division is forming away from the chamber.

On the great issue of Europe a line is being drawn through Establishment England that counts far more than the carpet of the Commons. It divides the barons of wealth-creating Britain. It divides the great ones of the Tory party. Across it, ever more fiercely, a great struggle is in prospect. And it is happening far away from cameras or reporters, over dining- room tables, fax lines and in plush hotel lobbies.

Last week, the activists of the Conservative Party had their say about further European integration. And their say was 'no way'. They had the most vivid speakers, the biggest fringe meetings, the support of the best Tory journalists and an unerring eye for populist argument. Essex man? This is an Essex of the spirit, whose mental empire reaches across swathes of the country. Such are the forces pressing on John Major for a further turn of the anti-European ratchet, and they are formidable.

When Mr Major refused to rule out a referendum on European Union, they concluded that they had him on the run. They may be right. But they are not the only players. For the City has been looking down at the Essex revolt; and the City does not like what it sees - events at Bournemouth were a particular worry. And this amounts to another considerable force bearing on Mr Major. As one Conservative put it yesterday: 'The moment the Tory party sunders itself from the financial and business interests of this country, it is finished.'

Just so. And the problem for Mr Major is that monetary union, the very aspect of European integration which causes the wildest heebie-jeebies among his party's plain people, is also the thing that most concerns the financial world.

Across the Square Mile, earnest think-ins have been held to assess what would happen if France, Germany and some others went ahead with a single currency, and Britain ruled herself a non-player. The City view is already that the compromise of siting the new European Central Bank in Bonn, rather than in the more threatening location of Frankfurt, came about as a direct result of British lack of enthusiasm for European Monetary Union. Since then, merchant banks have been wondering whether to take early options on a few more floors of office space in the latter city.

'The flow of business out of London would be huge and immediate,' one banker argues. Another director asks rhetorically who would buy Treasury gilts if Britain, which will take decades to shed its reputation as an inflationary nation, were not part of the Euro-mark bloc?

How many people in power share these worries? Not enough, the anti-Europeans gleefully conclude. They reckon that the only thing holding Mr Major back from promising a referendum and publicly ruling out monetary union during the next Parliament (perhaps via the 1996 Tory manifesto) is the prospect of his Chancellor resigning in fury. But Kenneth Clarke could, I suspect, live with Cabinet backing for a referendum; and no one at the Treasury yet believes Mr Major will change the policy of studied neutrality on monetary union.

But there is more to it than that. The other player is corporate Britain, which can be likened to a rival, unseen Conservative conference that Mr Major must also consider. Consider, for starters, the following institutions: Kleinwort Benson; Hambros; Coutts; N M Rothschild; Salomon Brothers; United Biscuits; Midland Montagu; BAT; Enterprise Oil; Grand Metropolitan; ICL; Rover. A glittering array of names, some of whom have close and historic links with the Conservative Party, providing parliamentarians, money, help with privatisations, and so on.

Eminent individuals from all of these are among the early declared or likely backers for a new, pro-EU organisation, provisionally named the Foundation for European Political Studies and first mentioned in this column last week.

The National Westminster Bank is teetering on the edge of joining and if it goes ahead, the other clearing banks are likely to follow.

Add to that line-up, which has been assembled over the summer by the Tory Euro-MPs Michael Welsh and John Stevens, the approving support of an advisory council including such big Tory beasts as Kenneth Clarke himself, Sir Leon Brittan, Lord Howe of Aberavon and David Hunt, who now chairs more cabinet committees than anyone else. Pile on, in a general way, the backing of top people in the Treasury, the Foreign Office, the DTI and the Bank of England. Chuck in junior ministers and other riff-raff, and what do you have?

You have, I would argue, a mobilisation of the pro-European establishment unlike anything seen since the original referendum campaign. The central line of attack from the new institute will be a robustly patriotic Europeanism, arguing that Britain can be hugely successful within a strong EU, on the financial side as well as the military-diplomatic side. 'Just as they need Britain for defence reasons, because our bombs work, so we have a lot to offer in financial services. British bankers, like British missiles, reach farther than Strasbourg,' one of the organisers stoutly affirms.

Other parts of the business world remain more evenly divided about the merits of further European integration. To generalise again, it is the smaller and medium-sized firms that tend to be looking to the Institute of Directors to speak up for their Euro- scepticism. They seem to speak a different language from the City types.

Instead of talking about the shortage of world capital, and the importance for Britain of being inside the biggest pool of savings, the smaller firms worry about social directives and red tape.

But this division of opinion in the Temple of Mammon is likely to make the argument fiercer, rather than less fierce. We should not be fooled by assuming that politics is always an activity we can see. For every act of finger- stabbing oratory by a Norman Lamont or a Norman Tebbit, there will be table-banging in the glass towers of the City. For every crude threat from the crusaders of the Tory conference fringe, there will be an equally crude one from bankers and industrialists, uttered in private.

This contest is not only between rival visions, but between rival kinds of politics, one of which is familiar and visible and easily reportable, and one of which is not. It will be a fascinating tussle: let battle commence.