Mr Redwood said the "third way" that the current socialist leadership of the European Union believed it had found, did not exist.

"There is no such third way" between state planning and free enterprise, he told the Confederation of British Industry's annual conference.

"They have just found a new language for their old way, the way of high taxes and state control."

Brussels bureaucrats

Mr Redwood said he wanted Europe to prosper as much as anyone else, but work was needed if a single market was to lead to a free market.

The mounting restrictions on business needed to be tackled, he said, citing a committment to an art trading tax which would damage Chrisities and Sothebys.

Mr Redwood also attacked the single currency.

"Four years ago those few of us who said that a single currency inevitably meant tax increases from Brussels were regarded as lunatics" but higher common taxes are now "the leading item on the agenda of the Presidency of the EU", he said.

Extra taxes on the continent had cost European jobs as the larger the single currency area became, the more places suffered the wrong interest rates and exchange rates.

Mr Redwood called on the UK Government to use its influence in Europe to create a proper free market, before embarking on currency reform.

HIs speech was welcomed with only lukewarm applause by the generally pro-European CBI.

BA boss attacks 'protectionism'

British Airways chief executive Robert Ayling also attacked Europe and attitudes towards the airline industry in particular.

Mr Ayling said in many industries the Single Market was a reality, but this was not the case in the airline industry.

He said the industry had made limited progress towards full integration because of the "political machismo" of protectionism.

"Officials of member states talk in Brussels of deregulation and consolidation, but a vigorous rearguard action is being fought...to keep foreign airlines from competing with them on their own ground."

He called for state aid and covert protectionism to be exposed and driven out.

"Size matters, but freedom matters too," he said.