New Cabinet split on EMU on

BY PATRICIA WYNN DAVIES

Political Correspondent

John Major yesterday signalled an ever more distant prospect of joining a single European currency after an influential committee, backed by Kenneth Clarke and other Cabinet left-wingers, warned that staying out would leave Britain increasingly marginalised and at risk of higher interest rates and inflation.

As Tory pro- and anti-Europeans locked in a fresh round of combat over the controversial recommendation, a sceptical-sounding Mr Major declared during Prime Minister's Questions that it was "arguable" whether the circumstances would ever be right for Britain to join.

The support for monetary union came in the report of the Kingsdown inquiry, chaired by Lord Kingsdown (the former governor of the Bank of England, Robin Leigh-Pemberton). Mr Clarke, the Chancellor of the Exchequer, Stephen Dorrell, Secretary of State for National Heritage, and David Hunt, Minister for Public Services, sit on the governing council of the Action Centre for Europe (Ace), which set up the study.

Earlier, Ace's president, Lord Howe, the former Foreign Secretary, attacked "Euro-sceptic ministers" who were trying to secure a Tory manifesto commitment that Britain would not join EMU within the lifetime of the next Parliament as well as the current one.

The six-month investigation by business leaders, economists and politicians concluded that if other states went ahead in 1999 and Britain stayed out, homeowners and industry could face higher inflation, higher interest rates and monetary instability, while there would be considerable risks of losing job-creating investment from abroad.

The report was swiftly condemned by Euro-sceptics including Norman Lamont, the former Chancellor, leading backbencher Bill Cash, and Tim Melville-Ross, director general of the Institute of Directors. Michael Portillo, Secretary of State for Employment, said it was "rather bizarre" that the report contained "an attack on our opt-out from monetary union".

Lord Howe insisted, however, that Mr Major had also secured the right to play a full part in shaping the currency before finally saying "yes" or "no". EMU analysis, page 33