Howard forces Cabinet showdown

Explosive clash with Clarke over monetary union Home Secretary bids for 'moral leadership' of Tory right

Michael Howard, the Home Secretary, clashed fiercely with the Chancellor, Kenneth Clarke, over the European single currency in Cabinet last week, spearheading a right-wing bid to overturn the Government's "wait-and-see" policy.

At last Thursday's Cabinet meeting Mr Clarke, faced with a Eurosceptic rebellion over European monetary union, resisted debate over further policy changes, prompting what well-informed sources described as "sharp exchanges" with Mr Howard, and an "explosive" series of interventions.

The Cabinet discussion on EMU - the existence of which Downing Street denied last week - revealed the depth of divisions now existing at the highest reaches of the Government. By launching a direct attack on Mr Clarke's policy area, Mr Howard put himself at the head of the Cabinet Eurosceptics.

Some will see the Home Secretary's intervention as a bid to seize the moral leadership of the right, although his allies rejected that. It would, one argued, have been surprising had the EMU issue not been debated by the Cabinet after the turmoil of last week.

Other Eurosceptic ministers tried to intervene in the Cabinet row on Thursday, until the Prime Minister finally came to the aid of the Chancellor, backing his position in principle. However, the Cabinet did offer a slight concession to the Eurosceptics by agreeing to commission a new paper on economic preparations for monetary union to be delivered before the next election. Some left-wing Tory sources blamed Mr Major's failure of leadership for allowing the issue to blow up again, provoking yet more Cabinet turbulence.

News of the row came as John Major prepared for a TV interview today in which he will harden his anti-EMU rhetoric while sticking within existing policy. The Prime Minister will stress that there is no question of taking part in a single currency if the attempts to achieve convergence of the economies are fudged. And he will outline in more detail the economic criteria that the Government will apply.

Fractionally more sceptical rhetoric was trailed by two Cabinet ministers, Mr Howard and Stephen Dorrell, Secretary of State for Health, yesterday on Radio 4's Today programme. Both laid a more negative emphasis on the British attitude towards the single currency, but outlined a policy still acceptable to the Chancellor, who is on record as opposing any fudging of the convergence criteria.

Today, Mr Major is expected to stress that taking any stance that would undermine Britain's negotiating position would be irresponsible. Without changing the agreed "wait-and-see" policy, the Prime Minister is expected to spell out with greater clarity the tests he will apply to determine whether monetary union remains acceptable. But he is expected to try to avoid any suggestion that a sensible judgement is possible now. Allies of the Chancellor are making it clear that any statement with the intention or effect of ruling out the possibility of entering the first wave of EMU would be seen as a change of policy - leading potentially to a resignation.

Were Mr Clarke to storm out over a change of EMU policy, up to dozen MPs - including a handful of ministers - might declare themselves unable to support the new position. One said: "We are getting to the edge. Ken Clarke is the key."

Eurosceptic MPs were heartened yesterday; Bill Cash interpreted comments by Mr Howard and Mr Dorrell as extending the boundaries of the Cabinet's line. "The very fact that they are searching for formulas demonstrates a desire to move to a position in which we become more credible," he said. Mr Cash urged the Prime Minister to go further and declare against British participation in the first round of monetary union, arguing that "there is overwhelming, concrete evidence that it is a disaster area".

William Hill yesterday reduced the odds on a January election from 100-1 to 16-1.