Knives out for Lamont as crisis deepens: Clamour for Chancellor's head grows on all sides of a 'drifting' Conservative Party

THE CABINET and the Conservative Party were in disarray last night as Downing Street and the party machine tried desperately, but unsuccessfully, to batten down the hatches against the biggest political crisis since John Major became Prime Minister in 1990.

With ministers and MPs from across the party agreeing that Norman Lamont would be dumped as Chancellor of the Exchequer in a summer shuffle, Michael Heseltine, President of the Board of Trade, was wheeled out publicly to urge the party to keep its nerve in the face of 'one of the most stretching political experiences I can remember'.

Privately, however, one of his senior cabinet colleagues spoke of a public perception of 'drift'.

The cabinet source added: 'Our problem is we have gained a reputation for feebleness. We can't allow that to go on.'

The Prime Minister's office responded to the debilitating clamour for change by lashing out against inaccurate, bitter and twisted press reports - about the depth and length of the recession, and Mr Major's ability. It also predicted that Thursday's Cabinet would agree a legislative programme giving priority to deregulation and law and order.

A senior No 10 source said Mr Major was listening to the voters' message: that the pain and memory of the recession was running deep, and that Conservative disunity over Maastricht had tarnished the party image.

While Mr Major was said to be planning to respond with pledges to deepen and strengthen the recovery, frontbench and backbench colleagues agreed that first and foremost he had to get rid of his Chancellor.

From left, right and centre of the party, it was reported that Mr Lamont's fate had been sealed. One cabinet colleague said the Chancellor had, like David Mellor before him, reached 'the point of no return'. The cabinet source said Mr Lamont's departure had become inevitable, although he added: 'It would be a mistake to do it now. That would look like panic. But if we put it off until July, that will cause another two months of turmoil.'

Mr Lamont was not the only minister in backbench sights - John Patten, Secretary of State for Education, was emerging as a secondary target.

Mr Patten, Mr Heseltine and Michael Howard, Secretary of State for the Environment, said in television and radio interviews during the day that while the Government would listen to the voters, there would be no abandonment or change of policy.

Mr Howard told Channel 4 News: 'What I think we have got to do is explain to people more effectively why we are pursuing these policies, why we are so convinced that they will make life better for our people, and that is a task that we need to redouble our efforts to achieve.'

That prompted John Smith to reply: 'The Prime Minister should listen to what the public are saying. . . . They don't want the same policies presented differently.' After the Government had carried its proposal to levy VAT on domestic fuel Bills on a Commons vote of 295 to 285 - with two Tories voting against - Mr Smith added: 'They have heard little and learned even less.'

Earlier, Sir Norman Fowler, the Conservative Party chairman, said after a morning meeting with Mr Major: 'We did not talk about a change of policies or personnel. . . . We are not in the business of instant policy and instant reaction.' He ruled out an immediate reshuffle - something no one had either demanded or expected.

While Mr Lamont was being left to swing in the political wind, one senior backbencher protested angrily against the Oxbridge and Garrick Club snobbery of Mr Major's opponents, many of whom had not forgiven him for replacing Margaret Thatcher. He cited Mr Major's success on inflation and said: 'He is actually much tougher than she ever was.'

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