Mr Portillo met Jean Caines, Mr Heseltine's director of information, at a Westminster wine bar on 28 July, without any other officials present.
It is rare for Cabinet ministers to socialise with civil servants in other departments. Given the apparent strains between Mr Portillo and the DTI, the meeting will raise eyebrows at Westminster.
Ms Caines worked with Mr Portillo in 1979 when he was a special adviser at the Department of Energy. She said the meeting was social: 'We are former colleagues. We meet once or twice a year for drinks.'
Mr Portillo's leaked letter, sent when he was Chief Secretary to the Treasury before last month's reshuffle, gave Mr Heseltine a dressing-down for failing to consider big cuts in his review of expenditure. The tone in which Mr Portillo lectured his more senior colleague surprised politicians. In a fiercely ideological letter he wrote: 'Nowhere in your department's report is it suggested that the best help we can give business is to get taxes down or to control public spending.'
The Treasury has set up an inquiry into the leak. But neither man will be damaged in the eyes of his supporters: Mr Portillo, darling of the Thatcherite right, is happy to look tough on public spending, while Mr Heseltine likes to be seen as the champion of government help for industry. Some will see the meeting as evidence of links between the men, both potential contenders in any battle to succeed Mr Major.
It is unclear whether Mr Heseltine knew of the meeting, although he is aware that Mr Portillo and Ms Caines see each other socially.
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