Major feeds the Tory right with Brussels' rout; Inside Parliament

John Major's announcement of non co-operation with the European Union until progress is made on lifting the beef ban drew a shout of triumph from the Tory right, immediately followed by a call for still tougher action.

Leading Euro-sceptic Bill Cash said that although the Prime Minister's statement was "welcome in tone", the Government should look again at the legality of suspending payments to the EU. That was the way to bring other countries to the negotiating table, he argued.

And Bernard Jenkin, Conservative MP for Colchester North, warned: "The Prime Minister is starting down a road of forceful but restrained escalation. Until there is a happy resolution of this matter there can be no turning back." Mr Major appeared to agree, assuring the House he was "perfectly aware this course must be proceeded with until we have a satisfactory outcome". But he drew the line at illegality.

Suspending EU payments would mean breaking the law, he told Mr Cash. "And it wouldn't be a question of having to face the European Court of Justice. It would, in a matter of days, be a question of having to face the courts in this country."

Britain's beef industry was being treated unfairly but their case would not be helped by an illegal act that would entrench opposition abroad, he said.

Mr Major told MPs that progress would not be possible in the Inter-Governmental Conference or elsewhere until there was agreement on lifting the ban on beef derivatives and a clear framework in place leading to a lifting of the wider ban. "We cannot continue business as usual within Europe when we are faced with this clear disregard by some of our partners of reason, common-sense and Britain's national interests."

Mr Major said a proposal before Monday's EU vet's committee based on best scientific advice had been ignored by some states, some of whom has promised support. "I regard such action as a wilful disregard of Britain's interests and, in some cases, a breach of faith."

Pressed by Tony Blair, the Labour leader, to say exactly what the "strong language" meant, Mr Major said he would make sure beef dominated the EU summit at Florence.

To Nicholas Winterton, Tory MP for Macclesfield, the Prime Minister has "spoken for Britain", but Paddy Ashdown, thought the statement was aimed at narrower group.

"Most people will conclude that the Euro-sceptic minority of his backbenchers have now taken control of the Government's foreign policy," the Liberal Democrat leader said. "And that this [statement] is much more to do with appeasing them than it is with restoring confidence in the beef market."

The leaders had been at each others' throats only minutes earlier at Question Time over party funding, with the row fuelled by allegations that the Tories received pounds 100,000 from a Serb-born businessman linked to Radovan Karadzic and a "dubious" pounds 400,000 from the fugitive Asil Nadir.

Mr Blair said that in the light of concern on the funding of political parties, the "right, fair and honourable" course was an inquiry by the Nolan Committee. "If the governing party does not accept that, the inevitable question everyone will ask is: what have they got to hide?

But Mr Major flatly rejected a Nolan inquiry. "It's only in the Labour Party that donations and money buy influence . . . where trade unions provide the funds in return for votes at Labour's party conference," he said.