Party grandees clash over the vote for Europe

Inside Parliament: Lawson urges currency referendum t Clarke enthusiastic on single market

Lord Lawson yesterday lent his authority, as a former Chancellor, to calls to John Major to promise a referendum on any move to join a European single currency.

In a very different analysis to that of the current Chancellor, Lord Lawson told the Treasury Select Committee that if the Government decided to join a single currency, then before the Commons voted the issue should be put to the British people in a referendum. "I think realistically a referendum is bound to happen," he said. "It seems to me it would be sensible to make that clear now."

Lord Lawson's comments will be music to the ears of Tory Euro-sceptics who want the Prime Minister to announce a referendum and include the pledge in the party's general election manifesto.

But earlier this week Kenneth Clarke said a referendum need only be considered when and if the Cabinet decided to join. He had claimed the Prime Minister was of the same opinion. The Chancellor, however, is virtually the only Cabinet minister left who will express any sympathy for a single currency. Though Lord Lawson left office in 1989 after six years at 11 Downing Street his doubting view is more prevalent. "The reason I don't wish to see us join is because it is because it is essentially a political enterprise which is at best premature and worst extremely damaging," he said.

"It is likely to be damaging while the peoples of Europe are not in favour of submerging their autonomy and sovereignty and loyalty into a wider European entity. To do so prematurely would be to strain the political and democratic fabric very, very considerably and give a field day for the most unpleasant national, xenophobic demagogues in every country in Europe."

But the committee, hearing opinions on the final stage of economic and monetary union, was offered a very different scenario by Lord Kingsdown, the former Governor of the Bank of England Robin Leigh-Pemberton. A single currency enthusiast, he disagreed with Lord Lawson's assertion that the project was essentially politically inspired. "I see it as a logical extension of the single market."

The debate had been too much concentrated on sovereignty and constitutional issues, he said. More attention should be paid to where the jobs were going to come from over the next 20 years. If the day came when Britain had to make a decision and it was clearly put to the people "that our pockets are at stake", he believed there would be a much more pragmatic approach.

Lord Kingsdown thought it was "more likely than not" that a core of countries would go ahead with a single currency. There was a feeling in Germany and France that there was "a tide in human affairs" and that January 1999 might be the best opportunity. Other members might be the Netherlands, Belgium and Luxembourg.

The former governor warned that a referendum would mean a "period of great difficulty for sterling" when defensive measures would have to be taken.

One solution that is not likely to re-emerge is the "common currency" or "hard Ecu" to run parallel with national currencies which Lord Lawson advocated as Chancellor and was then taken up by his successor, John Major. Lord Lawson said that without warning him, the then Prime Minister, Baroness Thatcher, had told her European partners Britain would be putting forward an alternative plan for monetary union.

"I was faced with the task at very short notice of working one out," he said. Lady Thatcher was able to present her plan, but it was not one he wanted to revive.