AT 8.45am last Wednesday, more than an hour before Michael Portillo rose to speak, the arena of Bournemouth's cavernous international conference centre was already buzzing. There was, however, something odd about the audience, for groups of young right- wingers were clustered at stategic points around the hall. Something out of the ordinary was clearly being prepared. Sure enough, when Mr Portillo made his way to the podium and uttered the words 'Europe isn't working', these groups - 'the foot-stampers' as one MP called them - exploded into wild, sustained applause. No one could possibly suggest that the Secretary of State for Employment's early-morning rhetoric had fallen flat.

It was quite a week for the new young Eurosceptics of the Conservative Party. The night before the Portillo speech, Lord Tebbit and James Goldsmith held a fringe meeting that drew an audience estimated at between 800 and 1,000 people - almost a fifth of the conference representatives. Simultaneously, the former Chancellor, Norman Lamont, used another fringe event to hint the unthinkable; that Britain might just be better off outside Europe. So complete seemed the sceptics' triumph that Lord Tebbit was heard chuckling in the press centre that his stance on Europe, so long the bane of the Major loyalists, is now thoroughly mainstream.

Is he right? Are the Conservatives, the party that took Britain into Europe, the party of Macmillan and Heath, finally turning their backs on Brussels?

IT IS now more than two years since Mr Lamont was forced, ignominiously, to take Britain out of Europe's exchange rate mechanism. Time has not been kind, either to Mr Lamont, who was sacked last summer, or to John Major, whose authority was badly undermined by the turbulent passage of the Maastricht Bill through Parliament.

And the troubles did not end with Maastricht. Easter brought more woes for Mr Major, this time over qualified majority voting. The Prime Minister initially resisted changes to the voting arrangements at the highest levels of the European Union on the grounds that they weakened Britain's veto. Eurosceptic forces at Westminster were marched to the top of the hill in defence of the British interest, only to see Mr Major capitulate without a fight. The vitriol flowed in the Tory party, and a vulnerable Mr Major found himself pushed into a more sceptical European election campaign than he had intended, with Tories championing a compromise vision of a 'multi- speed, multi-track' Europe in which Britain would choose its own pace and direction.

The European election results were less dreadful than many had predicted, and afterwards Mr Major shored up his personal position by using his veto at the Corfu summit over the choice of the next president of the European Commission. Belgium's Jean-Luc Dehaene was rejected as too federalist, and the 11 partner countries were told to find someone else. They did, and the colourless Luxembourger Jacques Santer was eventually deemed satisfactory. Mr Major claimed a victory, although the encounter left him with a few bruises.

That was the context in which, at Bournemouth's New Durley Dean Hotel last week, Mr Lamont took some revenge against his old boss. He did not quite say that Britain should get out of Europe, but he went some way beyond anything yet said by a mainstream Conservative politician. He called for examination of the options, 'ranging from membership of an outer tier, to participating solely in the European Economic Area. One day it may mean withdrawal'. Then he added: 'It has recently been said that the option of leaving the Community was 'unthinkable'. I believe this attitude is rather simplistic.' Cabinet ministers queued up to point out that the former Chancellor had little respectable support for his view. Even Mr Portillo rapidly distanced himself (although the Secretary of State for Employment's private view is probably closer to Mr Lamont's than he let on).

Other Cabinet ministers were angry. One said last week Mr Lamont was 'lucky to have been Chancellor at all'. On Tuesday evening Mr Lamont had to be protected from verbal assault by Major loyalists at a champagne party hosted by Maurice Saatchi.

Around the Cabinet table the consensus is that Mr Lamont's new line has more to do with his need to find a new seat, since his Kingston constituency is about to fall victim to the Boundary Commission. Ministers may be right, but it is a measure of how far the Conservatives have moved that such a position might be thought helpful in wooing constituency associations.

Perhaps more alarming for the pro-Europeans was the hard-hitting rhetoric of Mr Portillo and of Peter Lilley, Secretary of State for Social Security. Last year the right hijacked the conference to promote back to basics; this year their theme was Europe. Mr Portillo told the fringe that 'Labour supports federalism because it is ashamed of Britain', while Mr Lilley called for Britain to be 'at peace with our neighbours but not subordinated to them'.

In Europe, this sort of rhetoric has caused dismay and confusion at a time when, many argue, British views on economic matters were increasingly being taken seriously. As Sir Leon Brittan, the European Commissioner, put it on Thursday: 'You can't expect your partners to listen to you if you impress on them the message that they may be our partners but they are not our friends.' Sir Leon bitterly attacked Lord Tebbit as 'irresponsible' for suggesting that Brussels harboured ambitions to divide the United Kingdom into several regions of which Mercia would be one.

Nor was Sir Leon alone. Michael Heseltine, President of the Board of Trade, warned that, where Europe was concerned, 'turning our backs or simply opting out would be the most abject surrender of national interest'. Lord Howe, the former foreign secretary, joined in. And Mr Hurd also staked out a pro- European position.

The Foreign Office is exasperated. 'Why,' asked one source close to Mr Hurd, 'do the Eurosceptics assume that we, with our history and tradition, will always lose European battles? They are undermining our negotiating position.'

Mr Hurd's backers point out that the continuing obsession with Europe adds to the impression of a party fundamentally divided. It is, said one, like a scab that the party cannot help picking. One senior pro- European source said: 'There has been a toughening of Mr Hurd's stance against the sceptics. His rhetoric has got harder. And I think he has come to the conclusion that, on some issues, he has to try and draw a line in the sand. But there is also a growing sense that the pro-Europeans are fighting a losing battle.'

WHO HAS been driving the move to the right? One answer is the activists who roared their approval of every sceptic utterance at Bournemouth last week. 'Don't take this conference too seriously,' said one MP. 'At party conferences we drink at the fount of ideology.' The faithful, none the less, have been instrumental in the drift to the right over Europe. One senior pro-European said last week: 'There has always been a vocal Eurosceptic wing of the party which has used the conference, but this year there has been a change in the atmosphere to the extent that some parts of the party see the opportunity to reorientate this into a popular nationalist party.' There are also some practical forces at work here. As a rule, the people who are most active in a political party tend to be more radical than those who pay their membership and attend a couple of meetings a year. When a party loses members it is these more middle-of- the-road people who drift away first, leaving a reduced organisation that is more radical.

This has been happening to the Tories. Following the loss of up to 15 per cent of the party membership since the last election, the dedicated Eurosceptics suddenly find themselves a markedly more powerful voice in the party. It may also be relevant that the party is becoming older: a recent survey showed that the average age of members was 62. One right-wing MP claimed last week: 'The Eurosceptic line plays particularly well with the over-60s.'

This holds grave dangers for the Conservatives. Some see parallels with Labour's downward spiral in the 1970s and 1980s, when the party became increasingly extreme as it lost popularity. As one Tory put it: 'Just at the time when Tony Blair is looking outward to people who would not normally support Labour, we are looking inwards, concentrating on the people who back us anyway.'

But the diehards in the constituencies have allies at the highest level. At the heart of this effort to shift policy rightwards are the three Cabinet ministers: Mr Lilley, John Redwood, the Secretary of State for Wales, and Mr Portillo. They can also call for support in varying degrees on Michael Howard, the Home Secretary, and Jonathan Aitken, the Chief Secretary to the Treasury. A left-wing Tory lamented last week: 'Major has missed his chance to get rid of the 'bastards'. They now know they are unsackable and that shows in the way they behave.'

Their critique of Europe is both economic and constitutional. With Britain and Europe facing the challenge of the 'tiger' economies of the East - Singapore, Malaysia, Taiwan, South Korea - they argue that it is madness to impose additional costs on business of the kind put forward in the Social Chapter and some other Brussels regulations. These, they argue, make it impossible for Europe to compete. Labour costs must be kept low, or employers will take their jobs elsewhere and European goods will always be dearer than Taiwanese or Chinese products. They also point out that the strongest growth area for British trade is not Europe but Latin America and the Far East.

In constitutional terms they reject the notion of any further erosion of British sovereignty. They may concede the need for co-operation in areas such as defence, or co-ordinated European environmental policy, but essentially the sceptics see Europe as a free trade area.

That is as far as Mr Redwood would normally go. Mr Portillo and Mr Lilley, who dine together regularly and stay close on many of these issues, have added another dimension: rhetoric. On Wednesday Mr Portillo argued: 'Sometimes you have to tell Brussels when to stop. Stop telling us how many hours we're allowed to work. Stop telling kids they can't earn pocket money from doing their paper rounds. Stop telling small businesses they must give three months' paternity leave. Stop the rot from Brussels]'

In Conservative Way Forward, a Thatcherite pressure group founded in 1991, Mr Portillo has found a cadre of supporters to back his brand of politics. This has raised eyebrows among fellow MPs, one of whom last week accused Mr Portillo's followers of practising 'Nuremburg rally-style politics'.

Relations between the sceptics and Major loyalists are poor. Last week the conference organisers allocated Mr Portillo what would normally be a graveyard spot for his speech: the first debate on Wednesday morning. Few of his Cabinet colleagues turned out to support him on the podium, but the younger contingent from Conservative Way Forward was determined not to be hidden away, and hence the clusters of noisy 'foot-stampers' in the hall. Hence also the approaches by Portillo aides to sympathetic Tories, to try to persuade them to speak from the floor in the debate.

Government whips later complained that the Portillo 'triumph', which played so prominently in the next day's newspapers, had been orchestrated. Some observers believe that Mr Portillo has the support of 30 per cent of the parliamentary party and is well-placed to become leader of the opposition should the Tories lose the next election. Although the parliamentary party is not as sceptical about Europe as are the grassroots activists, there is a drift in that direction. During the Maastricht debate no fewer than 91 Conservative MPs signed a motion calling for a 'fresh start' on Europe.

Paradoxically, the sceptics' position has been bolstered by the election of Tony Blair as Labour leader. One pro-European explained: 'That part of the party sees Europe as a weapon against the new-look Blair Labour Party, one of the arguments being that, come the next election, our managerial record will not be good. Being hostile to Europe, so the theory goes, provides a cost-free option.'

Labour, this argument runs, will be pro-Europe, and could be attacked as poor patriots who are unwilling to stand up to our European partners.

Thus Conservative MPs and ministers increasingly perceive hostility towards Europe as a vote-winner. 'Tub-thumping on Europe has always been good for the Conservative Party,' said an MP frankly. 'If you took that message out on the the street in my constituency, people would agree that we want the economic benefits of a free trade area but the minimum of the rest.'

A Cabinet minister put it another way; 'I went to a school in my constituency and asked the children whether they felt as if they came from the locality, whether they are British or European. Only one girl put her hand up for Europe and I later discovered she was a French student on an exchange.'

After last week, tax-cutting and Euroscepticism are emerging as the likeliest Tory weapons in the future electoral tussle with Labour. This complicates British policy in the run-up to the intergovernmental conference on the future of Europe, due in 1996, and the crucial decision over a single currency, which may or may not be discussed there.

One theory is that Mr Major could go to the country in the middle of the conference, challenging Mr Blair to defend Britain's interests in the way that the Conservatives do. But he might equally call the election before the conference, promising to win the best deal for Britain. If the polls look bad, however, the option of a 'Union Jack election' in mid- conference is likely to seem preferable.

What of Mr Major's own instincts? His speech last Friday promised to say 'no' to the rest of Europe if necessary but to get a deal if he can. But his true feelings remain opaque. Some colleagues wonder if the Prime Minister's private views really matter at all.

'He is,' said one, 'the ringmaster to a number of competing factions. He is not driving events. He will go with the flow and do what he has to in order to shore up his leadership.'

(Photograph omitted)