Clarke's comments suggest the Tories are moving towards favouring a 'bad bank' 

James Forsyth 9:55am

Ken Clarke’s interview with Patrick Hennessy of The Sunday Telegraph is notable both for Clarke’s continuing message discipline and for his hint that the Tories are moving towards favouring a ‘bad bank’. When pressed on what he would do if David Cameron did call a referendum on Lisbon with the Tories calling for a no vote, Clarke replies:

 “"If we have a referendum, I doubt that Central Office [Tory HQ] will be on the phone asking me to campaign on it. I think if the other campaign got hold of me I'd have to say I am not available."

This answer gives almost nothing to anyone trying to write a Tory splits story. Indeed, Clarke is being more careful not to create a row over Europe now than he was during the Major government and 1997 election campaign when he was Chancellor.

On the economy, Clarke says:

"I think the toxic assets on the balance sheets [of the banks] are at the heart of the problem at the moment. It is exasperating that after so many weeks they [the ministers] have not really come to any conclusions."

If you think that the toxic assets are the problem, then—logically—you would expect someone to favour getting them off the bank’s balance sheets. The only obvious way to do that is through a ‘bad bank’ with the government taking over the toxic assets.