Britain will not turn its back on its colonies or Commonwealth countries as ties with Europe strengthen, according to the British Chancellor of the Exchequer.

Yesterday Kenneth Clarke said he believed membership of the European Union would not change Britain's relations with its worldwide allies.

In an exclusive interview with The Royal Gazette Mr. Clarke also said he thought Bermuda would gain little from Chinese rule of Hong Kong.

But he believes the Island could have an important role to play in controlling money laundering and that Bermuda's future relationship with Britain rests in its own hands.

Mr. Clarke is on the Island to attend the Commonwealth Finance Ministers Meeting, being held at the Southampton Princess Hotel.

After the meeting he will fly to Washington for the annaul meetings of the International Monetary Fund and the World Bank.

Britain is edging closer to even fuller ties with Europe -- including a single currency which many people believe could lead to a federal Europe and loss of national identity.

But last night Mr. Clarke, a leading Europhile, said Britain would not become inward looking towards its European partners at the expense of colonies like Bermuda.

"I do not believe Britain will. I strongly believe it should not. My being here is almost an illustration of that; I am a leading Europhile in the Cabinet.

"I am a leading protagonist in the European debate back home. I do not want to have anything to do with an inward looking European Union.'' Britain, he added, is a global trading nation, a great believer in global markets and has worldwide interests.

"One of the services Britain can do to the European Union is to stop it becoming an inward looking bloc,'' he said.

"The French have a similar view of the world. The French regard themselves as having a worlwide foreign policy, as Britain does.

"Membership of the European Union should not change the relationship between Britain and its worldwide allies,'' added the Chancellor.

Bermuda will be Britain's largest colony when the Chinese take control of Hong EU will look outward, says Clarke Kong next year.

However the Chancellor believes Bermuda is unlikely to benefit in terms of seeing international business relocate to the Island.

And there will be no pressure placed on Bermuda either to stay as a colony or seek independence once the Chinese take over Hong Kong, he said.

"The British and the Chinese are both working for a smooth hand over but after next year the status of Hong Kong and the basis on which people trade there will be a matter for the Chinese.

"Were the Chinese to be so foolish as to change the basis on which people trade in Hong Kong it is conceivable that financial business will move offshore. But I do not think that will happen.

"Hong Kong means an awful lot to the Chinese. With Chinese aspirations to change their relationship with Taiwan it is important for the Chinese to demonstrate that two systems in one country can work.'' Mr. Clarke added: "One of the liberal traditions of Britain is to defend the right of self-determination.

"Bermuda has a status where it can decide its own destiny. If Bermuda wishes to maintain its relationship with Britain, Britain is extremely happy to maintain it.'' One of the main topics of discussion during the Commonwealth meeting is money laundering. Mr. Clarke is due to speak on the issue today and hopes to make progress on ways to combat the problem.

He believes Bermuda already has a good track record and said it was for countries like Britain and Bermuda to set an example.

"It remains with countries like Britain and Bermuda to introduce best practices to control money laundering properly,'' he added.

In Britain, the Conservative Government which has been in power since 1979, is struggling 20 points behind the Labour Party in the opinion polls just eight months before a general election must be called.

But the Chancellor believes the Conservatives will claw their way back and points to precedents where politicians apparently headed for certain defeat have snatched power.

President Bill Clinton, said Mr. Clarke, was "nowhere'' before coming through to win the Presidency and Jacques Chirac was well behind in the polls three months before he was elected President of France.

"The economic situation is improving very rapidly. As Chancellor I think we have won back our reputation -- people trust our management of the economy and they feel a sense of well being.

"The Labour Party has reached the end of its political honeymoon. People are prepared to look more closely at them and decide whether they can trust them.

"We are trying to persuade people that a vote for Labour would be a threat to British economic prosperity.''