Tory party leaders believe it will give some short-term respite to Mr Major by turning the attention on to Labour's leadership contest. 'The pack will move off the Prime Minister and start running after the Labour Party,' one minister said.
An immediate reaction among delegates at the Scottish Conservative Party conference was that it could end Michael Heseltine's leadership aspirations.
The President of the Board of Trade has made a full recovery after suffering a heart attack in Italy and has impressed colleagues by his fitness. But Mr Smith's death underlined the risks of high office.
Mr Heseltine will be one of four Cabinet colleagues who will address the resumed Scottish conference today after its suspension as a mark of respect to Mr Smith and his family.
Tory supporters at the conference in Inverness privately said they believed Mr Heseltine could not now mount a successful challenge for the leadership because of the question mark over his health.
There has been a concerted effort by senior Cabinet colleagues, led by Douglas Hurd, the Foreign Secretary, to rally behind Mr Major and end the speculation about the leadership before the launch of the Tory European election campaign.
Mr Hurd was followed by Kenneth Clarke, the Chancellor, in warning that a leadership contest would be disastrous, whatever the result in the European polls on 9 June. That message was reinforced last night with an overwhelming feeling among Mr Major's colleagues that the party would no longer have the stomach for a challenge. However, that could change.
Cabinet ministers were calculating on the odds for the contenders for the Labour leadership. Tory leaders privately fear Tony Blair, the Labour spokesman on law and order, who has proved a brilliant opponent for Michael Howard, the Home Secretary.
Senior ministers said they believed Mr Blair would be a greater electoral threat than Gordon Brown, the shadow Chancellor. One minister said the Tory 'dream ticket' would be for Labour to elect John Prescott, an unreconstructed socialist, as its next leader.
The replacement of Mr Smith by Mr Brown, another Scot, would be exploited by ministers anxious to protect their southern strongholds. The Tory leadership had been considering draft plans for an election leaflet aimed at wavering Tory voters in the South with an attack on Labour's Scots-dominated Shadow Cabinet. It was to have depicted Mr Smith and other shadow ministers with the slogan: 'Do you want to be ruled from Scotland?'
They regard Mr Brown as a solid performer, but the Tories believe he lacks the intellectual imagination and excitement with which Mr Blair, with his English accent and English seat, could appeal with to their demoralised Tory supporters.
If Mr Blair is chosen as leader the long-term risks to Mr Major could be more serious. The attempt to bolster Mr Major's leadership could crack under the renewed threat of defeat at the general election.
The death of Mr Smith will also force the Government to re-adjust its strategy for the general election. With Mr Smith portrayed as a dour, uninspiring Scot, the Tory leadership felt comfortable. It planned to remind voters that it was Mr Smith, as shadow Chancellor, who was responsible for the pre-election budget that helped destroy Labour's campaign in 1992.
Ministers believed that the anger over the increases in taxes in the two 1993 Budgets would be eased by the time of the next election by further tax cuts.
But Mr Smith's death may change all that. The Tories went into the last election looking fresh with a new leader. This time it will be Labour, forced by tragedy to make the change, who will be led by a fresh, young leader who will increase the impression that the Government is tired and has outlasted its time in office.Reuse content