Labour hedges bets as Tories splinter


Returning to Britain from continental Europe last weekend one experienced a definite sense of unreality. The Sunday papers were full of stories about the renewed Tory civil war over the European single currency.

Not for the first time since last May it seemed that some sections of the British press remained fixated on the affairs of the Conservative Party, as if sublimely unaware that it is no longer in power. And whatever William Hague's problems, they pale, surely, beside those with which Tony Blair would still have to contend.

For just six days earlier, the Chancellor, Gordon Brown, delivered a "defining" statement to parliament about the government's attitude to the euro which defined nothing much at all.

In a manner reminiscent of Margaret Thatcher's enforced attitude to the Exchange Rate Mechanism, Mr Brown contrived to signal that Britain under Labour would probably join the euro when it considered the time right. However - while in principle approving the single currency project - the Chancellor indicated that the Blair government almost certainly would not wish to join before the next election.

And - with the requirement that the single currency be seen to be successful, the economic case for joining unambiguous and the British economy sufficiently convergent with the rest of Europe's - he offered no clue as to how soon thereafter the most important decision by any British government in peacetime might actually be made.

The Chancellor's pro-European tone, together with his assurance that government and business would begin active preparations, left Euro-enthusiasts to travel hopefully. But the Euro-sceptical wing of Mr Blair's election-winning coalition was also able to crow that Tony had vowed to save the pound - well, for five years at least.

Doubts about Mr Brown's performance were initially masked by fears of a meltdown on Wall Street, and a singularly inept performance by the shadow chancellor, Peter Lilley. By last weekend, however, you might have imagined second and third thoughts about a skilful parliamentary performance which still left the government with all its options open.

But no. Two Conservative front bench resignations - and, more crucially, two back bench interventions from Kenneth Clarke and Michael Heseltine - proclaimed the news that the divisions which so tormented the Tories in government had followed them into opposition.

Hours after Mr Lilley's Commons failure to land a single punch on Mr Brown, Mr Hague made the crucial decision to accept the Chancellor's statement as a declaration of intent to scrap the pound. The Tory leader's response, in turn, was to confirm his intention to carry opposition to the euro into the next election - effectively ruling out British membership for 10 years.

This stung Mr Clarke to call on Mr Blair to mobilise a cross-party campaign for a "Yes" vote in a referendum on the single currency, which he suggested could take place before the next election. And only Mr Heseltine's emergence at the head of the 20 to 30 Tory MPs believed hostile to the Hague line prevented the final defection of Peter Temple-Morris. Insisting that somebody had to lance the Euro-sceptic boil, Mr Heseltine declared: "There is going to be a single currency. Short of nuclear war, or some event on that scale, the Europeans are going to do it. The only issue is when Britain joins."

The picture of confusion was further complicated by the resignation of a millionaire party backer, Paul Sykes, who said he was quitting because Mr Hague was not prepared to rule out scrapping the pound for all time. This point was eagerly seized on by Labour's Peter Mandelson, who said Mr Hague had drawn back from an intellectually coherent, if mistaken, position: "In trying to avoid deciding on the issue of principle and keep both sides happy, the Conservatives have ended up with a totally illogical policy."

However, Mr Sykes and Mr Mandelson might have spoken too soon. In a subsequent article Mr Hague declared: "Tax and spending lie at the heart of sovereignty." His supporters believe he moved from the pragmatic to the principled when he said: "This is not some arcane constitutional argument. This is about the power of a democratically-elected British government to run the British economy in the interests of British business and the British people."

Mr Hague, it seems, has determined to lance the Tory boil. For Mr Clarke and Mr Heseltine the message is that the shadow cabinet will not be held to ransom by a minority within the party. Historians are divided as to whether a split is under way, as strategists are uncertain about the election-winning power of any single issue. But the battle lines for the next election are being drawn.

The politically-correct view is that Mr Hague has foolishly tied himself to the euro's failure. But to what is Mr Blair tied? The Prime Minister clearly hopes to shift public opinion. But on the evidence thus far, Euro-enthusiasts have cause to wonder what the government's final pre-poll position might be if that opinion remains doggedly sceptical.