Mr Clarke has for eight years been the deputy chairman of British American Tobacco, the second-largest producer, which sells 855 billion cigarettes annually in 190 countries.

The scale of his earnings, which does not appear in his declaration in the Commons Register of Members’ Interests, was uncovered by The Times from the annual reports of BAT. His annual fee is £150,000 plus £21,000 of benefits in kind that, in the past, BAT was not obliged to record.

Mr Clarke, who has a clutch of other City directorships, has pledged to resign from BAT, which agressively promotes the sales of cigarettes in the Third World, if he becomes Tory leader in the autumn. He is a key figure on the board of the £2 billion company. He chairs the remuneration committee, which fixes the fees of the chairman, executive directors and management board.

Mr Clarke is not required in the MPs register of interests to disclose the income from his City posts but merely the names of the directorships. By the time of the leadership contest his income from BAT since 1998 will have been £1 million.

His lucrative links with the cigarette industry will be a gift for Labour and the Liberal Democrats if Mr Clarke becomes Tory leader. Even some of his supporters in the Conservative Party believe that his continued connections to the cigarette industry will be a political liability.

Mr Clarke, 64, the most popular choice in opinion polls to replace Michael Howard as leader of the Tory Party, also heads BAT’s corporate social responsibility committee. The committee is co-ordinating efforts by the company, which has 15 per cent of the world cigarette market, to reducing child labour.

A spokesman said: “Ken Clarke is a key figure in BAT. He takes an active interest in the area of child labour. While there is none involved in our factories we know that on tobacco farms child labour is widespread. Often the farms are very small and the only way they can be viable is for the children in the family to be involved. But we are looking at ways that we can make the production process less reliant on child labour.”

The BAT website says that the company is, “Developing a long-term strategy and programme to combat child labour; raising research-based awareness of the reasons why child labour occurs; working with all relevant stakeholders to eliminate child labour in tobacco growing”.

The week before he announced his candidacy in the 2001 contest The Times tracked down Mr Clarke to a hotel in Ho Chi Minh City in Vietnam. He was on BAT business but denied that he was promoting the sale of cigarettes to young people. “This is as good a place as any to contemplate the future of the Tory leadership,” he said.

Mr Clarke flies all over the world on business for BAT and was in Kuala Lumpur this year. The current leadership contest is Mr Clarke’s best chance of winning after two unsuccessful attempts as the party activists, who are overwhelmingly Eurosceptic, are almost certain to be excluded from the process.

His supporters maintain that Mr Clarke is relying on MPs to vote for him in the belief that he has by far the best chance of defeating Gordon Brown, who is widely expected to take over from Tony Blair during the present Parliament.

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