THE Tory party is engaged in a "battle for survival" which could end with its eclipse as the official opposition by the Liberal Democrats, a senior shadow cabinet member warned yesterday.

The failure of either candidate for party leader to embrace the modernisation agenda of Michael Portillo has left the Tories at risk of becoming the third party of British politics, said Shadow Foreign Secretary Francis Maude.

His warning came as a war of words over Europe raged between leadership contender Kenneth Clarke and supporters of his rival Iain Duncan Smith.

On the eve of the distribution of ballot papers to 330,000 Tory members, former Chancellor Mr Clarke challenged Mr Duncan Smith to commit himself publicly to continued British membership of the European Union, claiming that his European policy amounted to little more than "a euphemism for leaving the EU".

Mr Clarke told BBC1's Breakfast with Frost: "For as long as I have known Iain, he has always argued vehemently that we should renegotiate the basis of the treaties and leave if we can't renegotiate them."

The Duncan Smith camp dismissed Mr Clarke's accusation as "complete rubbish", insisting: "Iain has never, ever contemplated Britain leaving the European Union."

And former party chairman Michael Ancram predicted "chaos" in the party if Mr Clarke was elected Tory leader on September 12 with the intention of joining Tony Blair on pro-euro referendum hustings.

Outgoing leader William Hague gave his endorsement to Mr Duncan Smith, warning that a Clarke victory would split the party over Europe.

In a letter to to Ron Kirk, his constituency party chairman in Richmond, Mr Hague said: "I fear the alternative to (Duncan Smith's) election would be for our party to slide back into the divisions over Europe we have done so much to move away from."

Meanwhile, Mr Maude warned that the choice of leader could prove immaterial unless the winner was willing to adopt the agenda of inclusion and modernisation of Mr Portillo's failed leadership campaign.

He told BBC Radio 4: "This is a battle for the survival of the party.

"If we do not change ourselves and make ourselves appealing to a much wider group of people, rather than arguing about things which are of interest primarily to ourselves, we will fail and we will run the risk after the next election of becoming the third party."