Tories put into a spin by Portillo: Refusal to rule out prescription charges for pensioners dismays MPs

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MINISTERS and Tory MPs were left in a state of general dismay last night after Michael Portillo, Chief Secretary to the Treasury and one of his party's rising stars, had repeatedly refused to quash reports that some pensioners might lose their entitlement to free prescriptions.

The issue forced John Major on to the defensive at Commons question time. He urged John Smith to give up his groundless scare stories and 'tedious, weekly shroud-waving'. The Labour leader accused the Government of compounding its broken pledges on value-added tax with plans to introduce a 'tax on being ill'.

The vituperative exchanges followed a radio interview in which Mr Portillo said that pensioners' entitlement to free prescriptions was 'an excellent example' of the sort of universal benefit - provided regardless of income - 'that needs to be looked at' as part of the spending review.

He also compared the projected growth in this year's pounds 80bn social security budget to 'a sort of cuckoo in the nest', adding that it was unsustainable.

Fuelled by such remarks, Mr Smith demanded an assurance that millions of pensioners and children would not be made to pay for prescriptions.

The Prime Minister said he had hoped that Mr Smith would have welcomed the third successive, monthly fall in unemployment, but then embarked on a carefully-worded script.

With Mr Portillo sitting at hand on the Government front bench, he said the Chief Secretary had been instructed to examine all government spending to make sure it was well-targeted and delivered value for money, and to identify possible savings.

'But he knows, in doing so, that he must protect the position of the most vulnerable members of society, and that is what he is doing.' However, as yet, Mr Portillo was merely being presented with options by the departments under scrutiny - Social Security, Health, Home Office, and Education. No options had yet been considered, no decisions had been made, none were imminent - and 'many will need to be discarded', Mr Major said.

That assurance, said to have been reinforced during a rare visit by Mr Major to the Commons tea room in the evening, calmed party jitters on the issue - although criticism of Mr Portillo remained.

While some colleagues agreed that it was necessary to open up a debate about the need to curb spending with deep cuts, as presaged in a speech by the Chief Secretary on Wednesday night, there was widespread anger that Mr Portillo had sustained the prescription report.

Colleagues rejected the idea of an end to free prescriptions as absurd, and some heavy expletives were levelled against Mr Portillo, described by one ministerial critic as 'an ass' for giving credence to something that was politically impossible.

Even Cabinet colleagues thought Mr Portillo had unnecessarily conjured up spectres at a time when the electorate was hostile and the Prime Minister was hoping to capitalise on growing signs of economic recovery.

John Biffen, a former Chief Secretary, reflected the general view of his party when he said he would be very surprised if the Commons gave a majority to the prescription option. 'I do not believe you can proceed with a pounds 50bn deficit without recourse to further taxation and that means increases in income tax.'

That had been ruled out by Mr Portillo on Wednesday, although Whitehall sources indicated that the Chancellor would take that decision in his November Budget. However, there was no certainty at Westminster as to who would be Chancellor.

Forty-one Tories voted against the Third Reading of the Bill to ratify the Maastricht treaty last night. It was passed by 292 to 112 votes - fewer than half the Commons supporting the Bill. The rebellion followed a suggestion by Norman Lamont, the Chancellor, that it might be possible to re-enter the exchange rate mechanism after two years. Details, page 10

Cuckoo in the nest, page 10

Leading article, page 21

Andrew Marr, page 23