Shirtsleeved Major rallies the Tories to his cause

John Major yesterday whipped his party together on Europe, with a bravura question-and- answer conference session that brought out all the hard-hitting qualities of his 1992 election campaign.

But, while the Prime Minister's performance thrilled his Bournemouth audience, the real test of the Tories' rare unity will come when Kenneth Clarke, Chancellor of the Exchequer and bogeyman of the Euro-sceptic Right, faces the conference today to reiterate the government case for keeping an open mind on a single currency.

Senior ministers believe that, if the party can unite, it is in with a fighting chance of winning a fifth term of office in the next election: if the Euro- sceptics continue sniping from behind, the party will go down to defeat.

There was no sign of abatement in the attack from what one minister described as the "loony-tune" fringe yesterday.

But Mr Major told the conference that there was one thing that would distinguish the Tory case for the development of a Europe of nation states and Labour's determination to use it for the introduction of back-door socialism.

"It would be if this party stopped conducting an internal debate with itself and began conducting a debate with the electorate and the Labour Party," he said to loud applause.

"My job," he added later, "is to take our ideas to Europe, not just hijack their ideas and bring them back here."

Hitting all the buttons of an essentially loyalist audience, a shirtsleeved Mr Major said the great prize of Europe would be the drawing aside of "an economic iron curtain", allowing the countries of eastern and central Europe into the European Union.

But he then directly took on the dissidents, saying that while it might win him "easy applause", there would be immense risks from unilaterally and immediately ruling out British participation in a single currency - in effect withdrawing from negotiations on the terms of its creation.

"This is an issue which, if it were to go wrong, could crack wide open the European Union as we have seen it build up over the last 25 years," he said.

"And if it cracked open, then it would impact on this country as well, so we need to make sure in the national interest that we have Britain's voice in this debate."

Mr Major said that if the single currency failed, "then the fall-out . . . would make the fall-out of the collapse of the Exchange Rate Mechanism look like a teddy bears' picnic, economically, right across Europe".

Bolstering his position still further, he reassured the conference, to strong applause: "If a future Conservative Cabinet decided that it was right to enter into a single currency, if it decided that, then there would be a referendum of the full nation specifically on that particular question."

While some pro-European ministers believe that argument could be won over a two-month referendum campaign, many believe that a Conservative government will not be able to enter a single currency in the next Parliament - even if Mr Major does win.

Meanwhile, Mr Clarke is actively engaged in preliminary negotiations on the formation of a single currency, which made marked progress during a Dublin meeting of economic and finance ministers earlier this month.

And it is Mr Clarke who will provide the litmus test of unity when he addresses the conference - following the announcement of the latest inflation figures this morning.

The test is so critical that it was even considered whether he should mention the single currency. However, it was decided that the issue had to be faced.

Nor will the politically pugnacious Mr Clarke duck the question of tax cuts. One Treasury source said yesterday that tax cuts would have to be paid for by spending cuts, which no Cabinet colleague has been quick to volunteer.

One minister even said last night that the promised expansion of workfare remained an experiment, because the Treasury was not yet satisfied that a national scheme would provide actual savings.

In yesterday's trail-blazing question-and-answer session Mr Major told representatives: "If the Conservatives are out on the streets, knocking on the door, saying 'We are the Conservatives, this is what we stand for', we win.

"And if they're wringing their hands saying 'We're behind in the opinion polls, we're very unpopular', then they don't win."

While he ducked some of the more sensitive questions - including a demand that handguns should be held under secure conditions in gun clubs - he agreed to examine the possibility of privatising the London Underground.

However, after Ian Lang, President of the Board of Trade, had earlier announced plans to curb trade union immunities for strikes in monopoly public services, Mr Major also said: "We aren't in a trade union bashing mode."

The Conservatives in Bournemouth, pages 6, 7 & 9

Donald Macintyre, page 21