Tory reshuffle stirs up row over Europe

As John Major prepared to carry out his ministerial summer reshuffle today, there was strong speculation at Westminster that more ministers are ready to resign over his refusal to rule out a single European currency.

The threatened resignation of David Heathcoat-Amory, in spite of intense pressure for the Treasury minister to remain in the Government, ripped the lid off a simmering row among the Prime Minister's most senior ministers over the party's election manifesto policy on Europe.

Kenneth Clarke, the Chancellor, has been joined by Michael Heseltine, the deputy Prime Minister, and Malcolm Rifkind, the Foreign Secretary, in the battle to prevent the Tories going into the election promising to rule out a single currency for the lifetime of the next Parliament.

They are insisting that the party should fight on the Government's White Paper policy of a promise of a referendum if a Cabinet recommends joining a single currency. Mr Clarke's pro-European supporters said Mr Rifkind and Mr Heseltine were supporting the Chancellor to ensure that he is not isolated by Euro-sceptic colleagues.

The split in the Cabinet has led to some ministers warning privately that, with less than a year to go, they are ready to quit. Party whips have been engaged in a heavy damage limitation operation to avoid more ministers leaving the Government. The reshuffle of the lower ranks expected today will do nothing to end the bitterness within the Government over Europe and could leave some ministers, such as David Davis at the Foreign Office, disappointed with the failure to get higher office.

Euro-sceptic Tory MPs said Eric Forth, the Thatcherite employment and education minister, and David Maclean, Michael Howard's loyal deputy at the Home Office, are among the disgruntled ministers. "The bitterness in the tea room has to be seen to be believed," said one ministerial aide. "Major has got to sort this out with Clarke, or force him to go."

The reshuffle will see some ministers who feel jaded after years in office stepping down to make way for younger blood. Those going are expected to include John Bowis, from the Department of Health. Tim Eggar, the energy minister, and Steve Norris, the transport minister, have announced their intention to step down. But Patrick Mayhew, the Secretary of State for Northern Ireland, who has told friends he is exhausted, may have to continue until the election unless Mr Major changes his mind in favour of dramatic changes to his pack.

Mr Heathcoat-Amory, the Paymaster General at the Treasury, was refusing to comment over weekend speculation that he will quit to campaign against a single currency. Bill Cash, the leading Tory Euro-sceptic, said: "My argument is for a single currency to be put on the agenda for the inter-governmental conference to put Helmut Kohl [the German Chancellor] and Tony Blair [the Labour leader] on the spot. It would be a winning stroke. If David Heathcoat-Amory were to resign, that would be very effective in putting pressure on the Prime Minister."

Terry Dicks, another Euro-sceptic Tory MP, warned Mr Major against "pussy- footing around".

Part of the Tory panic over Europe was caused by rumours that Mr Blair was about to declare a commitment ruling out a single currency for the lifetime of the next Parliament. Authoritative Shadow Cabinet sources yesterday denied any such commitment by Labour.

But Mr Blair, who is fighting attempts by the left wing to unseat Harriet Harman in the Shadow Cabinet elections on Wednesday, is facing a challenge from more than 50 Euro-sceptic Labour MPs. They are publishing a pamphlet tomorrow calling for Mr Blair to rule out the single currency.

The "People's Europe" group is calling on activists to challenge their Labour MPs over their position on Europe. The group warn that joining a single currency would lead to a Labour Government axing pounds 18bn from public spending schemes, including hospitals and schools. They warn Mr Blair that it could split a Labour Cabinet in the same way that is has divided the Conservatives.