Euro-sceptics: surfing the tide of history

The battle for the Conservative leadership is not simply about party unity or winning the next election. At stake is the entire future of Toryism

John Major's decision to risk all by resigning the leadership and obliging his critics to put up or shut up has been described as brave, bold and imaginative. It is certainly unprecedented, a desperate move born more from weakness than from strength, with consequences for John Major and for his party that are far from certain.

Worn out by sniping from his backbench critics, from a hostile media and from Margaret Thatcher, Major is asking the party to declare whether it wants him to continue to lead it or not. But much deeper questions are at stake.

The election is not just about Major but about the kind of party the Conservatives want to be. MPs have to decide whether preserving unity on the present basis is still possible, or whether the party should be reconstructed around a new programme and under a new leadership.

The Conservative malaise runs very deep. The party is divided over Europe but it is also divided over its immediate past.

Was the Thatcherite era a golden age which provided the signposts and inspiration for the future, or did it see the hollowing out of Tory England, the destruction of the party's links with the institutions and interests which for so long have placed it at the centre of British public life and equip it with an ability to articulate both the requirements of the state and the needs and aspirations of the people.

The party now seems increasingly adrift from the most important centres of the British state and British society and has also lost the support and trust of sections of its core electorate.

The European issue is at the heart of the Conservatives' problem and the crisis of John Major's leadership. For three decades the Conservatives were the party of Europe and made the running. Macmillan made the first application, Heath took Britain in, Thatcher signed the Single European Act, and Major negotiated the Maastricht Treaty. When he was first elected, Major steered the party in a strongly pro-European direction. The centrepiece of his policy was membership of the ERM.

Yet since the forced exit from the ERM in 1992, the party has begun moving in a strongly anti-European direction. The traditional arguments based on realism and economic interest have tended to be eclipsed by the strong emotional pull of arguments about British or, more often, English national identity.

It is looking increasingly doubtful that the Conservative party can be won again to a strongly pro-European line. The party is reaching deep within itself and its traditions and seems ready to repudiate the kind of European role which Macmillan and Heath saw as a substitute for Empire. Increasingly it would appear that the Conservatives now want to redefine the nation and their political project against Europe.

This debate might just be an internal ideological argument of no interest to the rest of the country, a sign of the party's terminal decline, a spasm in the manner of Bennery in the Labour Party in the early Eighties. In that case the European issue will be seen in the future as the cause of the implosion of the Conservatives and the signal for the beginning of a new consensus dominated by Labour.

But there is a different reading. The Conservatives are entering a new radical phase, building on, but also going beyond, Thatcherism. In the process there will be a substantial purge of the party and the creation of a new populist Conservativism around the themes of national identity and minimal government, which it would use to rebuild its popular support and offer a very different agenda to that of New Labour.

The outcome of the leadership election will be a further signal of how far and how fast the Conservative Party is moving. MPs are forced to make some very difficult choices. They have to rank the candidates and potential candidates in terms of at least three different criteria. Who is most likely to unite the party, who is most likely to win the election and who do they prefer ideologically? For few MPs will one candidate come out best on all three counts. In deciding the trade-offs between them, MPs will be drawn inexorably into considering the future direction of their party and whether a radical change is either possible or desirable.

Three simple scenarios can be laid out. In the first, Major wins re-election. The advantages of dumping him for another leader are outweighed by the risk of increasing disunity. A different leader might not command sufficient support in the party to win a vote of confidence in Parliament, thus precipitating an early general election in very unfavourable circumstances. If John Major cannot hold the party together, who can do any better?

This scenario offers no solution to the party's deeper long-term problems or to its current electoral predicament. Confirmation of John Major as leader may keep the lid on the party's divisions but it will not remove them. The crucial divide on Europe will not be resolved and the reasons for the unpopularity of the government will not be dispelled. The safest option offers little prospect of avoiding defeat in the general election. It is the least risky on offer but it offers no real hope of recovery and no new policy direction.

It is aimed principally at keeping the party together until the general election. The real battle for the identity of the party is postponed until the party is once again in opposition.

Since under this scenario many MPs would not be around to take part in this battle, other scenarios which offer greater hope of turning the electoral tide may prove more enticing. Is there a way in which the Conservatives might wrest back the initiative and pull off the remarkable feat of reconstructing the party while it is still in government?

In scenario two, the outcome of the leadership election on the second ballot would be the victory of the candidate from the pro-European wing of the party, Michael Heseltine, who would be chosen not because he is pro-European but because he is seen as the candidate most likely to win the general election. He would provide a more dynamic and exciting style of leadership and would seek to develop a new radical populist appeal for the party on tax, mortgages and law and order while seeking to sideline European issues during the run-up to the general election.

Aided by a strong economic recovery in 1996 and the return of some media support, a government led by Heseltine might be able to claw back a great deal of Labour's poll lead. Victory in the general election would by no means be certain but it would be once again a possibility.

Like scenario one, the schism over Europe would be postponed until after the election but with this difference. The pro-European faction of the leadership would take firm control of the party and the government. From the standpoint of the anti-European wing, the short-term electoral advantage of allowing Heseltine or Clarke to take over the leadership would have to be weighed against the long-term implications. The anti-Europeans might just find themselves isolated and marginalised

Many of the Thatcherites also fear Michael Heseltine because he has his own distinct agenda for government first set out after he resigned from the Thatcher government over Westland. At its core is the acceptance of a significant strategic role for government in the economy. Heseltine offers not a deepening of the Thatcherite programme but a turn away from it. His thinking is more in tune with the new Democrats around Clinton than with Newt Gingrich.

In scenario three, the anti-European wing would mount a successful challenge for the leadership, leading to the election of Michael Portillo or John Redwood. Such a leadership would launch Thatcherism Mark II. National independence would become the central plank of policy. A single currency would be ruled out and other commitments would follow, such as the abolition of qualified majority voting in the Council of Ministers. Domestically the party would seek major new cuts in expenditure and taxes as well as a crackdown on crime.

The anti-European wing of the party has become increasingly confident over the past six months. It claims that it speaks for the majority of the parliamentary party and the majority of the constituency activists. What it does not command is a majority of the Cabinet. Key portfolios - the Foreign Office, the Treasury and the DTI - have all up to now been in the hands of the pro-European wing. The demand of the anti-Europeans is that this situation be rectified starting with the replacement for Douglas Hurd.

The anti-European wing is, however, divided on tactics. The most vociferous elements, the Euro rebels, have been pressing for a leadership election and Major's removal because he will not rule out the possibility of a single currency. It is their activities which prompted Major's pre-emptive strike. But another group, mainly composed of the hardcore Thatcherites, is fearful that if Major is forced out, the leadership will be seized by a pro-European candidate such as Heseltine.

They prefer to back Major because they think time is on their side. The party is steadily consolidating behind an anti-European position and they believe that if the party loses the next election under Major's leadership, it is the anti-European wing which will be best placed to win a leadership election. Then the reconstruction and purging of the party can go ahead in earnest, undistracted by the short-term need either to maintain unity or to win the election.

The calculations of the pro- and anti-European factions will have a decisive bearing on the outcome of the leadership election. The pro-European faction knows that this is probably the last opportunity to install Michael Heseltine as leader. They also realise that if the party goes down to defeat under John Major, the backlash in the party when it goes into opposition is likely to favour the anti-Europeans. They have an incentive therefore to try to seize control of the party now. They need the Conservatives to win the next election in order to keep the anti-European wing at bay.

The anti-Europeans are split, with many of them still preferring to support John Major until they can be sure of taking over the leadership. But if Major falls, the anti-Europeans will have to fight to prevent the victory of a pro-European.

A game is being played for very high stakes. Many Conservatives have concluded that the gap between the two factions is now so wide that one or other will be forced out of the party in the years ahead. The battle over the leadership, therefore, is also a battle over what kind of party the Conservative Party should be in the future and which faction should control it.

Both sides of the arguments are making assumptions about what the electorate wants and will vote for. The anti-Europeans are urging that the party should come out forcefully against the single currency and adopt the slogan "Labour wants to abolish the pound". They believe that a fiercely anti- European stance and a reassertion of a distinctive English national identity can become the populist basis for a successful fight back against Labour.

The pro-Europeans point to the increasing unease in industry and the City that the logic of the anti-European argument will end with withdrawal from the European Union. They believe that the adoption of the anti-European programme will complete the demise of Tory England by isolating the party from the support of its core interests and allowing the role traditionally occupied by the Conservatives to be filled by New Labour.

The problem for the pro-Europeans is that they have been forced back on to the defensive. It is possible that the British political elite, which has been so strong in its support for the European Union, may have seriously miscalculated. Perhaps the national mood as well as that within the Conservative Party is beginning to turn. If so, there are warning signs for Labour here as well. If the anti-European wing of the Conservatives succeeds in establishing its dominance of the party, the nature of the contest for popular support between the parties will change. And the danger for Labour is that it will find itself once again successfully defined by the Conservatives as the anti-national party.