Europe row is hitting pound, says Clarke

Kenneth Clarke, the Chancellor, yesterday sharply raised the stakes in the ministerial fightback against his right-wing critics by complaining that they were undermining the pound.

On the eve of two further threatened parliamentary revolts over Europe, Mr Clarke responded to questions on the recent battering inflicted on sterling by declaring that the markets "keep having a look at the political debate" in Britain.

Speaking after a Brussels meeting of European finance ministers, he said his party was "sick and tired" of endless ideological debate on the issue. "I don't think the few of our colleagues who try to raise the temperature on Europe are doing a great deal of good for market confidence."

The claim drew immediate protests from some right-wing backbenchers and a declaration by Gordon Brown, the shadow Chancellor, that this was "the first time the Chancellor has publicly confessed that splits in the Tory party are damaging our economy".

Mr Clarke's remarks came after an editorial in the journal of the neo- Thatcherite Conservative Way Forward group which sought to isolate the Chancellor by claiming his pro-European stance was undermining the position of the Prime Minister. Only hours before, the right-wing 92 Group had met to discuss ways of applying more pressure on the Chancellor to commit himself to tax cuts in the next Budget.

Sir George Gardiner, editor of the journal, faced criticism at last night's meeting for the article's timing - something over which he said he had no control.

The 30-strong gathering of the 92 Group called not only for early tax cuts but a "return to conviction politics that point up the differences between Conservatives and Labour". The meeting kept its pressure on Mr Clarke by querying "his reliance on pessimistic Treasury forecasts".

Earlier, the Chancellor said: "I do think it is important that the Conservative Party sticks to the agreement that it has on the fundamentals of European policy, and sticks to it for some years to come, until the next election.

"We are a coherent, credible, governing party because we have a coherent position on Europe. Those on the fringe who try to open up an ideological debate on what might or might not happen in the future do harm to the Conservative Party."

Mr Clarke also gave little quarter on tax cuts, adding: "Anybody who thinks this is going to be an easing up of our sound fiscal policy is mistaken."

The Government faces more possible confrontation with its "whipless" Euro-rebels today over a motion that "congratulates the Government on its robust negotiating stance on the Common Agricultural Policy".