Lamont poised to take on Major

Resignation of Douglas Hurd strengthens determination of PM's campaign team

A challenge to John Major by Norman Lamont looked increasingly likely last night after a fevered first day of the leadership election campaign which was marked by Douglas Hurd's announcement of his retirement. The Foreign Secretary's decision sent the strongest signal to the Euro-sceptics to rally behind the Prime Minister.

Mr Lamont, the former Chancellor, was under pressure from his Kingston upon Thames constituency not to challenge Mr Major. But his unofficial campaign manager, Edward Leigh, a former minister, said: "Mr Major has caused this election. He has done the best job he can. Now we must debate the issues."

Mr Lamont will decide at the weekend whether to gamble all by standing against the Prime Minister, but with his constituency disappearing in the boundary changes, he has little to lose and is under pressure from the Euro-sceptics to seize the opportunity to put the intellectual argument for a change of policy on Europe. Teresa Gorman, a leading Euro-rebel, said she would stand if nobody else did. Nominations close at noon on Thursday for polling on 4 July. Nicholas Budgen, another member of the group who lost the whip, said the Prime Minister had wrong-footed critics but not stopped a challenge. "All it has done has won the Prime Minister 48 hours' breathing space," he said.

Mr Lamont would be a serious threat to Mr Major's survival, possibly provoking a full-scale Cabinet battle for the leadership.

John Redwood, the Thatcherite Secretary of State for Wales, heightened the threat from the right, when he appeared reluctant to endorse Mr Major. In an extraordinary move, Mr Redwood put off a statement until Monday although he later said he supported Mr Major's campaign.

Those close to Mr Redwood believe he was upset at not being told by Mr Major of his intention to provoke a leadership contest. The Prime Minister left it to Michael Howard, the Home Secretary, a member of his campaign team, to tell Mr Redwood.

Mr Major will meet 160 constituency chairmen at Conservative Central Office today to push his campaign bandwagon forward, before going to the Lord's Test. His close colleagues denied he was about to make a commitment to a referendum on the European single currency, but it could still emerge during the campaign.

The timing of Mr Hurd's announcement - before the European summit in Cannes with the Prime Minister - was potentially embarrassing for the Government, but it underlined the determination of Mr Major's campaign team to maximise its support. As Mr Major's campaign swung into action from its Cowley Street headquarters near the Commons, Mr Hurd confirmed he would be standing down from the Cabinet in the next reshuffle in the summer. "I am making the announcement because I want to disentangle this, separate this out from the Prime Minister's campaign," he said. "I want his campaign to succeed. I don't want my future to be tangled up in it."

The Euro-sceptics had demanded Mr Hurd's head, and his departure opens the way for the wide-ranging Cabinet reshuffle they wanted. Malcolm Rifkind, the Secretary of State for Defence, was the favourite to take over from Mr Hurd, but Mr Major could reward Ian Lang, Secretary of State for Scotland and one his campaign managers. Michael Howard, a more Euro-sceptic team member, also wants the job. The right wing believes its champion, Michael Portillo, could become defence secretary with more influence in the Cabinet.

Some right-wingers were holding out for more evidence of a shift of policy on Europe by Mr Major. "It doesn't make any difference. There will still be massive abstentions against Major," said one Tory MP.

Mr Portillo's own bandwagon appeared to be rolling last night, if Mr Major, against expectations, fails to win outright on the first ballot. A survey by the Independent showed Mr Portillo was gaining support in Tory constituencies, and a telephone poll in the Sun gave Mr Portillo 44 per cent against 46 per cent for Mr Major. Mr Portillo's supporters said privately they were waiting until next weekend to see if the bandwagon gains momentum, to persuade more Tory MPs to abstain in the first ballot, despite the risk of letting in Michael Heseltine, President of the Board of Trade.

Mr Hurd said: "I discussed this often with the Prime Minister and last year I said I decided that this summer -'95 - was the right time for me to retire and I let him know in February."

CONSERVATIVE LEADERSHIP ELECTION: inside pages

View from constituencies; campaigns take shape Pages 2, 3

Douglas Hurd, knight of diplomacy; world-wide tributes Page 9 Why Major decided to jump; mad media moments Page 15 Leading article: Party in search of a new vision Page 16 Andrew Marr: 'The centre cannot hold'; Vernon Bogdanor Page 17