Mr Hanley, also given a Cabinet seat in the reshuffle, hit back after Lord Tebbit, the former chairman, accused him of lacking the weight to counter Labour under the leadership of Tony Blair.
Casting doubt on whether Mr Hanley was Mr Major's first choice for the chairmanship, Lord Tebbit said Mr Major 'still urgently lacks a 'heavy' - a big-enough hitter to force Tony Blair to turn some of his fire away from the Prime Minister'.
The 15-stone party chairman retorted on BBC radio: 'I'm actually bigger than Norman Tebbit on almost every scale . . .'
The reshuffle has increased tensions between the right and left wings within the Cabinet. Some ministers fear the promotion of Michael Portillo - an anti-Maastricht 'bastard' - signalled a right-wing shift by Mr Major to respond to the threat from Mr Blair.
The Prime Minister planned the reshuffle as part of a strategy to refocus the Government's appeal on its key issues, such as law and order, low taxation and education.
Sources close to David Hunt, the former Secretary of State for Employment, believe Mr Portillo will reverse Mr Hunt's rhetoric over full employment, and will go on to the offensive over the trade unions.
Mr Hunt, moved sideways by Mr Major to take charge of the Citizen's Charter and the Civil Service, had alarmed right-wingers by raising the prospect of co-operation between industry, the Government and the trade unions in a speech to the TUC conference on full employment.
Many on the Tory left had hoped that Mr Portillo would be given a 'carpeting' by the Prime Minister over his disloyalty on the issue of the European single currency. They were dismayed at his decision to promote Mr Portillo from the Treasury to one of the key economic departments. 'I think it was quite a right- wing shift,' one of Mr Hunt's supporters said. 'Portillo won't be making any speeches to the TUC. It's all going to change now.'
Mr Portillo will maintain Mr Hunt's attack on the social chapter in meetings of the European Council, but his European role is being keenly watched by fellow Europhobes. His team was strengthened by two other right-wing appointments: Philip Oppenheim, a Thatcherite free-marketeer, as under-secretary, and Ann Widdecombe, as minister of state.
Senior Tories believe the reshuffle leaves open the prospect of another large-scale shake-up of the Government before the general election. Tory MPs expect Douglas Hurd, the Foreign Secretary, to step down from office, probably next year. Malcolm Rifkind, Secretary of State for Defence, has his sights on that job.
Although a number of older ministers retired on Wednesday, some senior ministers are already preparing to retire next July in the next full-scale reshuffle.
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