Tories give qualified support to Chancellor

A SUBSTANTIAL increase in unemployment, which will be announced today, is unlikely to shake Conservative support for the Government's economic policies, according to a survey of Tory backbenchers.

There is growing support for a cut in interest rates among the MPs, but the strong message to the Chancellor from the survey, conducted by the Independent over the past two days among more than 35 MPs, is that there can be 'no quick fix' to get Britain out of recession.

Most of those contacted rejected devaluation of the pound, and special measures to stimulate the housing market, in spite of heavy pressure for action from businesses and building societies. There was also stoical support among most for the Chancellor, who is expected to start his Tuscan holiday tomorrow as the latest inflation figures are released.

However, that support may be fragile. There are warning signs that it could begin to crumble if some recovery is not evident by the end of the year. One mainstream Tory MP said: 'Norman Lamont hasn't got a track record which gives one reason to have confidence in him. Give him till the end of the year.'

But most thought he was doing a good job in difficult circumstances. One summed up the mood: 'His performance isn't one to inspire confidence, but nobody ought to blame him because these very major decisions have to be collective, Cabinet decisions. In a difficult position, he is having to hold the line. I would not put the blame at his feet.'

Peter Thurnham (Bolton North East) said: 'The Chancellor should be seen to be more in touch with smaller firms.' To overcome that, Mr Thurnham said, he hoped to set up a telephone link between his constituents and the Prime Minister or senior ministers, so that people got the right impression.

David Congdon, the MP for Croydon North East, said: 'It's not that we want to wear a hair shirt and to be very brave, but none of us are convinced that there is a simple way out of the difficulty. There is a danger that business leaders are talking this into a worse situation through the fear that is going to get worse feeding on itself.'

The call for interest rates to be cut by 2 percentage points is likely to increase. One MP with a southern seat said: 'It is coming in loud and strong from the grassroots and small businesses - something must be done on interest rates.'

Seven of the MPs contacted called for an immediate cut in interest rates, but most strongly opposed devaluation. Of those seeking an interest-rate cut, five called for the pound to be allowed to float. They includedNicholas Budgen and Richard Shepherd, a Maastricht rebel, who said: 'I don't blame the Chancellor for what is happening; I think it is the responsibility of the Prime Minister. He booked us into ERM; he should get us out of this trouble.'

But Sir Michael Neubert (Romford), a former minister, supported the call. He said: 'In my constituency, the businesses are desperate; they are going to the wall. I think we should have more confidence in the market. We should allow the pound to find its own level. This would lead to recovery. If we support the economy with high interest rates, we do so at the expense of small businessmen. It is a chastening experience to meet such people.'

A parliamentary private secretary, who would be sacked for opposing Government policy, wanted to see the Exchange Rate Mechanism collapse 'under its own absurdity. Realignment will prolong the agony. If you are terminally ill, the kindest thing is for the doctor to let the patient die peacefully.' The main worry among the MPs, who included new members, former ministers and those from the right and left, is the lack of confidence among businessmen which they fear is holding back recovery.

Some MPs fear the fall in receipts caused by the recession will lead to the Public Sector Borrowing Requirement running out of control.

There is stoical support for public spending cuts in the autumn, but some special pleading. Keith Speed (Ashford) the MP for Ashford, said: 'The Chancellor has got exactly the right policy. I have confidence in him, subject to what he does with capital expenditure. It is important that he doesn't cut money for public transport.'

John Townend, chairman of the backbench finance committee, was one of only three MPs who supported special measures to stimulate the housing market. He called for a bonus for first-time buyers, with mortgage tax relief doubled to pounds 60,000. He also sought a realignment of the pound and co-ordinated reduction of interest rates. But he said he firmly backed Mr Lamont, who opposes such a policy.

Anne Winterton (Congleton), who is also opposed to the Maastricht treaty, expressed concern about rising unemployment and the effects of the ERM.

She said: 'I don't believe the Chancellor's policies will work. He has tried a route but it has failed for reasons beyond his control. He should now change his tactics.'

Others were more patient. One Tory MP with a key swing seat in the South said: 'It will be a slow grind, but by the end of the year things will be different.'

A new Conservative MP in the Midlands said: 'It's like hangovers - just at the worst possible moment when you think you are going to be sick again, you come round. We have to learn from the last few years not to build up mountains of debts. We don't want any more artificial booms.'

A former MP who returned to the Commons this year said: 'I am not one who knocks Lamont. He won the argument at the election . . . it's his bad luck that his time will be up just when the recovery will come. He's the Chancellor for the recession.'

Michael Colvin (Romsey and Waterside) said: 'We could find ourselves with real cuts in spending for the first time. The spending round will be painful. Both Major and Lamont are former Chief Secretaries to the Treasury. We have got the right men to do the job.'

(Photographs omitted)