Mr Major and his party chairman, Sir Norman Fowler, dismissed demands for Mr Portillo, Chief Secretary to the Treasury, to resign over off-the-cuff comments which suggested that foreign students could buy educational qualifications and overseas business practices were corrupt.
In a further defensive move last night, the Prime Minister denied that he would be fighting for his personal survival in the forthcoming town hall and European elections. 'I am fighting for the prosperity of this country,' he said in a Sunday Times interview.
'I have never run away from a challenge in my life. If there is a single Conservative who thinks we are facing difficult elections, I would say to them 'Right, get out and fight and help us win them'.'
Mr Major conceded that the polls in May and June might become a mid-term referendum on his administration, but insisted: 'If people want to talk generally about my stewardship, I am very happy about the position that the economy is in. We have the fastest growth rate in Europe, and that growth is going to accelerate.'
He derided Opposition claims that the Conservatives were riven by dissent. 'We are not fighting ourselves. We have got socialism to fight. At the next general election, if we beat the socialists again I think they are finished as a credible force.'
However, Mr Portillo's speech continued to arouse deep unease among some Tory backbenchers yesterday. Mr Hugh Dykes, Conservative MP for Harrow East, condemned the remarks as 'a colossal blunder', which required profound explanation 'if he is to remain a minister'. Mr Portillo's 'dreadful comments' had revealed again the deep hatred of the European Union felt by some 'extreme right-wing colleagues'.
Another centre-Left Conservative, Jim Lester MP for Broxtowe and a member of the Commons Select Committee on Foreign Affairs, added: 'This was obviously not a sensible thing to do. It is a reflection of his inexperience. Frankly, I don't see him in the next generation of contenders for the party leadership.'
As controversy continued to swirl around Mr Portillo, Lord Archer, a former party vice-chairman, dropped a key passage from a speech to the Young Conservatives' conference in Southport which called for the resignation of ministers who transgressed.
The peer omitted from an earlier draft of his speech the words: 'If you are a backbencher, shut up; and if you are a minister, resign.' Also missing from the delivered speech was a passage which read: 'All these groups are pathetic, and they should only let their views be known in private, and if there is any minister to whom this applies, and who is currently running the company down behind the chairman's back, they should resign.'
Lord Archer, an outside contender for the chairmanship of the party should Sir Norman step down in the summer, said that the words had been removed before the Portillo speech.
Mr Major said that the matter was finished, and Sir Norman, speaking in Southport, added: 'I don't think for a moment that he should resign. He has apologised; he has corrected the remarks. I think we need to get back to serious politics.'
But the fresh bout of Tory turbulence proved a big setback for Mr Major after a week in which he took a new tough stand with the right-wing 92 group, and called for discipline at a meeting of the backbench 1922 committee. It also dealt a blow to Mr Portillo's hopes of a big promotion in the summer and Lord Archer's aspirations to the chairmanship.
Mr Portillo is also at the centre of a new Cabinet dispute over Treasury attempts to curtail spending on an apprenticeship scheme announced by David Hunt, the Secretary of State for Employment. The Chief Secretary has sent a note which questions whether the department should proceed with its plans without first finding out whether the scheme can be run without public money.
The Government is pledged to have about 150,000 apprenticeships by the end of the 1990s and is due to spend pounds 1.25bn over three years. Mr Hunt is fighting to protect his scheme against a fundamental review of its spending by the Treasury.
The Conservatives used yesterday's conference to launch their campaign for the local elections in May. Sir Norman described John Smith, the Labour leader, as 'lazy and unimaginative', adding: 'Mr Smith is very happy to spread smears and allegations about Conservatives on the flimsiest of evidence - but he has stayed strangely silent about the position in his own constituency backyard of Monklands.'
The attack, drawing on allegations of nepotism, is part of a counter-offensive against Labour's charges of sleaze in Tory-run councils such as Westminster.
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