Lamont to turn spotlight on Delors' bigger budget

NORMAN LAMONT, the Chancellor of the Exchequer, will today turn from defending his own economic strategy to challenge other EC countries to cast a critical eye over Jacques Delors' bid for a 30 per cent rise in the Community's budget.

Mr Lamont's call, to be made as he chairs the first EC finance ministers' meeting under Britain's presidency, comes after an energetic weekend rejection by John Major of Thatcherite claims that Britain risked being run by a centralist government in Brussels.

But both men's immovability on exchange rate mechanism (ERM) membership and their common opposition to any realignment or devaluation exercise - another clarion call of Baroness Thatcher and her supporters - took a battering yesterday from backbench Tory MPs.

Amid growing recognition of ERM constraints on domestic macro-economic policy, John Townend, chairman of the Conservative backbench finance committee, told BBC TV's On The Record that most Tory MPs 'would very much welcome a realignment within the ERM which enabled interest rates to come down'. Sir Patrick McNair Wilson, MP for New Forest, said: 'I'm still prepared to go along with it (the ERM), but not to the slavish point where we see the economy destroyed . . .'

The Prime Minister made clear in a Sunday Times interview that he would hold his nerve and wait for ERM membership's anti-inflationary benefits to filter through, and reap gradual economic recovery. Kick- starts of the economy by slashing interest rates unilaterally do not work, he said.

By keeping a strong currency and a tight hold on inflation, the Germans had ensured that businessmen, investors, savers and producers knew their government was not going to devalue their currency, he added. While feeling no need to mention Lady Thatcher by name, Mr Major defied his critics to produce a better strategy.

In a speech on Wednesday, Paddy Ashdown, the Liberal Democrat leader, is expected to urge recognition that European Monetary Union and an independent central bank are the inevitable next steps.

As to Lady Thatcher's other anti-EC offensive, Mr Major, apparently adopting his predecessor's combative style, declared: 'People say I should trim on Europe . . . Why should I trim on Europe? How should I trim on Europe? Do we need a Europe led by the French and Germans with the British having no influence?' He dismissed fears of Britain being run by a centralist Brussels government as 'fantasy'.

Mr Lamont will call on fellow finance ministers to apply the same rigorous tests to Community finances as they must to domestic spending. He has to remain neutral during the six-month presidency but, in an effort to reach a compromise on the Delors budget which split last month's EC leaders' summit in Lisbon, he is believed to have circulated an 85-point questionnaire asking states for detailed views on the proposed increase to pounds 60bn a year by 1997.