Major attempts to spread the pain. Tories take the carrot and stick to Tokyo

leaders of the industrialised world at the Tokyo summit where he

declared: ''We have the most sophisticated electorate in the world. They

want home truths, not empty promises.''

This coincided with Mr Major's decision to face a by-election in the

Tory stronghold of Christchurch, Hampshire, on July 29, which he is

almost certain to lose. A 22,000 majority can be swept away by the

discontent of Tory supporters deeply worried about the impending 17.5%

VAT impost on domestic heating.

Chancellor Kenneth Clarke was supporting him in this message that the

politicians of the seven richest industrial nations had to be prepared

to take hurtful political decisions if chronic unemployment is to be

stemmed.

Mr Clarke, battling to reduce the #50bn British deficit, clearly wants

another cut in interest rates to bolster Britain's fragile recovery.

This cannot happen, however, unless his colleagues in the Cabinet agree

to unpopular cuts in state spending and borrowing.

''You can cut interest rates,'' he said, ''when you have success in

getting inflation down and when you can build up confidence that you are

going to run your economy in a proven fashion.''

Mr Clarke was projecting the classic carrot and stick argument of

Chancellors who face tough decisions. On offer is the prospect of

reducing the cost of borrowing well below 6%, giving help to homeowners

and others by the end of the year.

However, the stick is clearly stated and equally clearly backed by the

Prime Minister. This prospect will be withdrawn unless the Chancellor

can reduce state spending and borrowing significantly in his November

budget.

Mr Major lectured his colleagues from the United States, Canada,

Germany, France, Italy, and Japan on the opening day of the Group of

Seven (G7) summit: ''All of us must take unpopular but necessary steps

to keep in check our social security budgets.''

Britain's #80bn-plus social security budget is under heavy scrutiny by

the Treasury in the current search for trenchant cuts.

Mr Major also requires that the G7 nations adopt the same rigorous

policies on competition that he believes are beginning to be accepted by

the EC after the recent Copenhagen summit. He insists on more flexible

working practices, the opening up of trade, and the reduction of social

services costs.

This is the only way, he told his summit colleagues, to reverse

mounting unemployment and ensure stable growth: ''There is no future in

a dash for growth or a quick fix. Too many of our problems are

structural and long term.''

In Britain, his Government is determined to reduce the #50bn deficit

this year. ''We are therefore having to take some tough decisions.''

He went on: ''If world recovery is to be sustained, we must cut budget

deficits in order to raise national savings and re-

lease resources for investment. Tight fiscal policy helps keep

interest rates low, encouraging investment, and creates growth and jobs

that last.''

Continental Europe, he said, matching his Chancellor's theme, still

needed further cuts in interest rates.

The decision by the Government to face humiliation in the Christchurch

by-election this month was inevitable. The death of Robert Adley last

month made it impossible for the Government to prolong a decision

through the summer.

In Tokyo yesterday, the Prime Minister was, in effect, discounting the

political effect of a loss to the Liberal Democrats of this Tory

stronghold.

The announcement of the by-election writ in the Commons yesterday

coincided with the publication of a string of opinion polls that put Mr

Major's personal support at 14%.

Before he left for the Tokyo summit, he was warned that the VAT on

domestic fuel which will hit the country next April would be enough to

lose him the election in Christchurch.