Leading Article: Clarke tries on Disraeli's shoes

AMID the hubbub of leadership speculation and local elections, Kenneth Clarke's remarkable restatement of One Nation Toryism should not be overlooked. In his Mais lecture on Wednesday, the Chancellor did what no minister dared to attempt openly during Margaret Thatcher's years. He grasped the inheritance of Disraeli and questioned how Conservatives should reconcile the sometimes brutal consequences of economic competition with fairness and humanitarianism.

Like his predecessor Sir Robert Peel - who destroyed the Corn Laws - the Chancellor has no truck with protectionism. But he recognises that free trade, for all its considerable benefits, has many casualties because of the rapid economic shifts that accompany it. 'It is our failure to adjust to these changes quickly enough,' Mr Clarke declared, 'that causes joblessness to increase as the overall wealth of the nation increases.'

He acknowledged that 'the pace of change has created fears and uncertainties among men and women in every walk of life'. And he offered a solution: 'A strong welfare state has an important role in reducing these fears.' The role he sketched was not the minimalist sop to public opinion offered by Michael Portillo. Rather, Mr Clarke updated Beveridge for the Nineties. He described a welfare state that would actively train and financially encourage people back to work. He offered carrots, not only a stick, to the unemployed and their potential employers.

Mr Clarke's rhetoric on job insecurity in Britain echoed President Clinton's mantra: 'Make change your friend'. His speech put unemployment top of the economic agenda. But it lacked specific and substantive new policies. This is where Mr Clarke should now concentrate his efforts. Aside from introducing a small childcare allowance, his November Budget focused on cutting benefits rather than providing incentives to help unemployed people back to work.

The Chancellor should begin by developing a welcome though inadequate policy introduced by Norman Lamont in his final Budget. He announced that employers would receive pounds 60 a week for every person they employed who had been on the dole for more than two years, with the subsidy tapering off over time. The scheme assumes that most people unemployed for a long time have given up seeking work. Employers need inducements to hire staff whose skills may be outdated.

But the scheme is a shadow of more ambitious ideas detailed by Professor Dennis Snower of Birkbeck College, who suggested it. This envisaged an initial employers' subsidy of pounds 150 a week, reducing by pounds 1.50 a week over two years. A properly funded national scheme along these lines is required.

Mr Clarke has rightly identified the need to reconcile a flexible market economy with civilised levels of welfare provision. If his speech is to be a milestone, he must now set out a radical agenda for addressing this issue.