Euro split looming

?Modernise or die.? That was the grim ultimatum put to MPs and party members by Michael Portillo when he made his bid for the leadership of the Conservative Party in the wake of its second landslide defeat.

His call for the party to create ?a new Conservatism for a new age? was a sound bite worthy of Blair himself, and perhaps the main reason for his ejection from the contest - admittedly by literally the narrowest of margins. In the end nobody, maybe not even Portillo himself, was clear about what he really believed. Hostages to fortune in the form of ambiguous statements about clause 28 and drugs made him an easy target for attacks from the right. The arrogance and bullying tactics of his campaign team, notably Francis Maude, alienated potential support and left Portillo?s judgement and even his integrity open to question.

What the party might have looked like under Portillo?s ?new Conservatism? can only be a matter of speculation. We must assume that, like all thinking Tories, he recognised that a merely cosmetic attempt to make the Conservatives more ?voter-friendly? in terms of aping New Labour?s ?inclusivity? and all the vacuous claptrap of Blairism could never suffice. The challenge facing the Tories is not just to engage in sober self-criticism of their image and current policies, but to subject their very purpose and identity in 21st century politics to the most fundamental scrutiny. Nothing short of such a radical overhaul can enable the party to win back and keep the support of those millions of voters who switched to Labour in 1997 and stayed with it on June 7 this year.

The choice now confronting the party is stark and unpalatable and, as everyone knows, revolves around the central strategic question of its approach the European Union, a sore that has been festering for more than a decade. Now the Tories must finally decide between, on the one hand, the likelihood of a bitter civil war under the arch-Europhile Kenneth Clarke, with the possibility that such bloody fratricide could end in a formal split; or, on the other hand, the possibility of a long march into the wilderness of sectarian Eurosceptic purity under Iain Duncan Smith.

?Who cares?? On a personal level such a reaction is understandable. No reader of this paper will shed any tears at the prospect of the Conservative Party tearing itself apart. Historically, after all, in its role as the natural representative of capital, it has been the most vicious and obdurate enemy of the labour movement and the working class, so some will say, ?Good riddance to the bastards?, at least for a while.

On the political level, however, the fate of the Conservative Party is a matter of considerable importance. No Marxist worthy of the name can remain indifferent to the disposition of forces in the ruling class. The rightward lurch of the whole political spectrum under Thatcher and then Blair, the gradual, as yet incomplete, metamorphosis of New Labour from a bourgeois party of the working class into a bourgeois party of the bourgeoisie and the effect of these developments on the parliamentary and extra-parliamentary direction of the Tory Party raise vital questions for our own politics.

Before looking at the leadership battle in a little more detail, it is worth noting that the parliamentary stage of the process was an object lesson in how not to run a genuinely democratic contest. To be sure, anything was superior to the ?customary practices? that in their time saw such figures as Eden, Macmillan and Home mysteriously ?emerge?, as if they were Tibetan lamas. Hague?s 1997 changes at least gave the membership a chance to have a say in who should be their leader. But the results of this first contest under the new rules demonstrate their serious shortcomings.

With only six votes separating the three contenders in the final round (the share of Clarke, the highest placed candidate, was just over 35%) and with a single vote between Duncan Smith and Portillo, the failure, at the very least, to put all three candidates forward to the membership exposes the whole process for the gesture towards democracy that it is. Many members will be effectively disenfranchised, having either to choose between two candidates, neither of whom they want, or to abstain.

Turning to the forthcoming vote itself, neither central office nor the Tory press have any real idea how the 333,000 or so party members will vote when they receive their ballot papers on or around August 20. Reports from constituency officials and other anecdotal evidence suggest that two out of three Tory Party members are to some degree or other Eurosceptic, yet the same sources indicate at this early stage that Clarke is doing well at grassroots level. The only rational explanation for this apparent contradiction is that, despite their own convictions about Europe, many Tories believe that Clarke has it in him to beat Labour, and power is what Toryism has always been about.

This approach has been well exemplified in recent days by those prominent Eurosceptics like John Gummer and Sir Malcolm Rifkind who have decided to throw in their lot with Ken. Gummer, for example, had this to say: ?Tory MPs want to win again and are prepared to put up with views they don?t particularly agree with on Europe if the man who holds them has the best chance of winning? (my emphasis The Times July 18). Quite so. To say that Rifkind, for one, ?doesn?t particularly agree with? Clarke?s passionate Europhilia is something of an understatement.

Whatever his faults - arrogance, laziness and the curious assumption that the leadership is somehow his ?by right? spring immediately to mind - Clarke is no fool. He realises that for someone like himself to lead a predominantly Eurosceptic party is not just a blatant contradiction, but an absurdity. Hence his repeated asseverations that, ?The Conservatives should stop talking to themselves about Europe and start talking to the electorate about the things that matter to them. Most leading Conservatives have immediately accepted the need to develop credible and distinctive policies on the future of the public services and the health service in particular. The lack of such policies was the biggest single cause of our defeat? (The Sunday Telegraph July 1). But it seems highly unlikely that the Tories are prepared to ?stop talking to themselves? about an issue that, as Clarke well knows, is pivotal not just for his own party, but for Labour as well.

Anyone who nurtures doubts about Clarke?s current position should take a look at the latest issue of the magazine published by Britain in Europe, effectively a Labour front organisation run by Simon Buckby, a Millbank apparatchik and a close friend of Peter Mandelson. Clarke writes: ?Tony Blair and I have just battled on opposite sides in the general election about the choice of government in Britain, but we both believe that Britain is better off in Europe, and would be better off still inside the single currency. We will never enjoy these benefits unless we have the courage to argue for them. Britain would be more prosperous in the euro.? Back in September 1999, in an act that many Tories regard as outright treachery, Clarke shared a platform with Blair and Liberal Democrat leader Charles Kennedy to further BiE?s pro-European agenda. If anything, Clarke is more ardently pro-euro than Blair himself and certainly more so than Gordon Brown.

As he puts it, ?With painstaking labour over the last two years Britain in Europe has assembled a huge army of supporters who stand ready to join the fight. In every corner and community of Britain, in business, in the trade unions and all political parties, pro-Europeans are ready to make the case. We have an enormously patriotic case to put to the British people. Staying outside the euro is weakening our country. Staying out has caused job losses, particularly in manufacturing and agriculture? (The Times July 21).

Of course, it is the business of Clarke, Blair and their friends in BiE to suggest that at the forefront of the ?huge army of supporters? for the euro you will find all the big industrial and financial capitalists in Britain. Hence, one of the more common misconceptions among commentators who derive their opinions from reading pro-Labour and pro-euro papers like The Financial Times, that euro membership and European integration are perceived by capital in general not only as desirable but as an urgent necessity.

In fact the case is not so clear-cut. True, the most forward-looking, the most dynamic elements of capital view entry into the single currency, sooner rather than later, as essential to their interests. But at all levels, given the very mixed performance of the euro economies to date, there is heated disagreement about the merits of the economic case for entry - let alone the political ramifications - especially in terms of the Bank of England being obliged to cede control over such vital matters as interest rate policy. Inevitably, Britain?s disastrous experience in the ERM weighs on the mind of many and, with an economic downturn, if not an outright recession, in prospect, many capitalists feel that now is not the time to contemplate such an important step.

Interestingly, Stuart Wheeler, chairman of the spread-betting company, IG Index, who donated more than ?5 million to the Tories before the general election, has let it be known that a Clarke victory would result in Eurosceptics like himself eschewing further financial support. Other prominent Eurosceptic capitalists who have formerly been big donors to the party, like Sir Stanley Kalms, chairman of Dixons, Lord Kirkham (DFS furniture) and Lord Harris of Peckham (Queensway Carpets) can be expected to take a similar line. They may be relatively small fish in international terms, but domestically they represent interests that the Conservative Party will ignore at its peril.

As he departs on his summer holidays in the west country (no Tuscan villa this year, thanks to the political aftermath of foot and mouth), Blair must be feeling content. A Clarke victory would give him valuable ammunition to argue for a euro referendum in this parliament, and even if Brown and the treasury were to fight a successful rearguard action against such a move, he would have the opportunity continually to keep Europe at the forefront of the public?s attention and to berate Clarke on the wide-open rift in his party on the whole question.

Clarke?s much-vaunted ministerial experience - whereby, in point of fact, he managed successively to alienate teachers, doctors, nurses and even policemen and, against some stiff competition, to become the most hated member of Thatcher?s last administration - will not cause Blair too many sleepless nights. Nor will the mooted ?blokish? appeal of his antagonist in the country at large cut much ice, given that, under Clarke, the Tories can be relied upon to turn their guns against each other, destroying whatever putative political capital might be expected to flow from Clarke?s supposed popularity.

Making due allowance for his own acutely partisan views, it is interesting to hear Lord Rees-Mogg raising the possibility not just of civil war, but of an actual split in the Tory Party if Clarke becomes leader, and talking of the ?grim prospects of an English National Party, formed from the wreckage of the Conservatives, of withdrawal from the EU becoming a major party?s policy, and of another two or three Labour parliaments? (The Times July 19). This nightmare scenario - from a mainstream Tory point of view - is by no means as fantastical as it sounds. Whatever the outcome of the leadership contest, there will be disaffected losers feeling bruised and fractious, and either eventuality could trigger momentous events. Clarke has stated his refusal to serve in a shadow cabinet under any of his original rivals, and it is not too difficult either to imagine a split coming from the left following a Duncan Smith victory.

Equally, as Blair must see it, Duncan Smith as leader of the opposition would hardly present a credible threat to the continuation of Labour?s predominance. Forget the trivial gibes about ?Hague?s dad? and his lack of hair. Duncan Smith may lack ministerial experience - but so, let it not be forgotten, did Blair himself in 1997 - and he has some radical (not to mention reactionary) ideas about the public services. In the terminology of the turf, however, this decent cove, with his military background, his penchant for corporal and capital punishment, and his ?never? to the euro is definitively ?out of Thatcher by Tebbit?. His best, indeed perhaps his only chance of success in tapping into the reported majority of public opinion that stands against Europe would be against a background of significant economic decline or some other unforeseeable political catastrophe. In the absence of such developments, Duncan Smith seems foredoomed to represent not the future of the party, but spectral voices from its past.

It is a truism that elections are lost by governments rather than being won by their opponents. For Blair, there can be no excuses this time for a failure to deliver when it comes to the public services, especially health. If he gets it wrong, he will be punished but, given the present disposition of forces, and the fact that Clarke?s policies in these areas are virtually identical to (some would say a shade to the left of) Blair?s, it would be a rash commentator indeed who would predict that a Tory will find himself in Downing Street come 2005/6.

The more interesting question is exactly what the Conservative Party will look like when the next election is called.

Michael Malkin