Portillo stands firm over conflict in leaked letter: Minister says discussion between spending departments implies 'healthy debate' about proper roles. Patricia Wynn Davies reports

AN unrepentant Michael Portillo made no concessions yesterday in the ideological conflict revealed by the leaked letter to Michael Heseltine.

Written in Mr Portillo's final days as Chief Secretary to the Treasury, the letter shows him employing to the full his talent for the hectoring approach as he upbraids Mr Heseltine for failing to proffer any radical cuts under the ongoing Fundamental Spending Review set in train by John Major last year.

Labour calculated the axeing of the activities spotlighted by Mr Portillo, the darling of the Tory right, could see the Department of Trade and Industry's comparatively modest budget slashed by a third. Mr Heseltine, who pledged to intervene before breakfast, lunch, tea and dinner at the 1992 Tory party conference, would be left a 'President without an Empire,' Robin Cook, Labour trade and industry secretary, spokesman, said.

Mr Portillo, promoted to Secretary of State for Employment in the recent reshuffle, made no attempt yesterday to dispute the authenticity of the letter, or to distance himself from its scathing, accusatorial tone.

Discussions between spending departments and the Treasury implied a 'healthy and appropriate debate about the proper role of Government,' he said in a statement. While carrying out Cabinet policy Mr Portillo's demand for a rethink appears much more prescriptive, however. The reviews were an 'opportunity to get government out of businesses' and individuals' hair,' he said in the letter.

He calls for the scrapping of:

Regional select assistance, which is paid in assisted areas where the money would create new jobs or prevent redundancies; this is the biggest item of expenditure, totalling pounds 101m in England this year and pounds 103m in 1995-96, but a DTI review of 1985- 1988 showed 100,000 jobs had been created;

The 'launch aid' programme of risk-sharing investment by government in aerospace; this is a loan system producing net gains for the public purse - pounds 58.1m in 1993-94 and a projected pounds 51.7m in the current year, the department said yesterday;

State research and development on coal, renewables and oil and gas production technologies;

Support for shipbuilding and the space programme;

The DTI consultancy for small firms;

Export promotion programmes.

The communication would have been a red rag to Mr Heseltine. He considered sending an equally pointed reply but in the end refrained. One of his most trusted lieutenants, Keith Hampson, Tory MP for Leeds North West and a member of the Commons trade and industry select committee, insisted however that the DTI was not wasteful.