Controversial Tory MEP Daniel Hannan will not be disciplined after naming Enoch Powell as his political hero, Conservatives said.
Mr Hannan caused fresh embarrassment for Tory leader David Cameron by making the admission on a US internet television channel.
He had recently provoked controversy by describing the NHS as a "60 year mistake" that he "wouldn't wish it on anyone".
But Tory sources said Mr Hannan would not face disciplinary action because his praise for Mr Powell had not referred to the late politician's stance on immigration. Mr Hannan was described as "pro-immigration".
In an interview with reason.tv, Mr Hannan was asked to name his political influences.
He replied: "In the British context, Enoch Powell ... as somebody who understood the importance of national democracy, who understood why you need to live in an independent country and what that meant, as well as being a free marketeer and a small-government Conservative."
Labour seized on Mr Hannan's comments and urged Mr Cameron to take action.
Business Secretary Lord Mandelson said: "Yet again, we are seeing the two faces of the Conservative party: the one they want to present to the public and the one which attacks the NHS and praises Enoch Powell."
Parmjit Dhanda, Labour MP for Gloucester, said: "Last week Daniel Hannan attacked the NHS. Now he's talking up Enoch Powell as a key influence for Cameron's Conservatives.
"When another Tory candidate praised Enoch Powell in 2007, David Cameron criticised him and he was forced to resign.
"The question now for Cameron is whether he will take similar action against Daniel Hannan.
"Or is it acceptable for the modern Conservative Party to attack the NHS and praise Enoch Powell?"
Earlier this month Mr Cameron dismissed Mr Hannan's views on the NHS as "eccentric".
The Tory leader forced the resignation of Conservative Party candidate Nigel Hastilow in 2007 after he wrote in a newspaper that Mr Powell was "right" on immigration.
MEP Glenis Willmott, Labour's leader in the European Parliament, said: "Daniel Hannan is showing us the real face of the Conservative Party, which would ruin the NHS and fuel racial tensions.
"I call on David Cameron to make it clear once and for all which is the true face of the Conservative Party."