The highly charged exchanges came as the Press Complaints Commission met to consider the issue of privacy against a background of controversy raised by press reporting of David Mellor's alleged affair with an actress. The PCC concluded that the public had every right to be informed about the private behaviour of politicians, if it could affect their conduct of public business.
Ministers' threats of a clampdown on press 'intrusion' prompted Kelvin MacKenzie, editor of the Sun, to allege on Tuesday that a leading member of the Cabinet had smeared Mr Ashdown in the election, a claim backed by yesterday's Independent report of a March plot to traduce the Liberal Democrat leader.
Charles Kennedy, president of the Liberal Democrat Party, wrote yesterday to Sir Norman Fowler, the Conservative Party chairman, calling for an early meeting to consider the 'extremely serious allegations' that had been raised by the Sun and the Independent.
Conservative Central Office had already repudiated Mr MacKenzie's claim that his office had been called by a Cabinet member bearing false allegations about Mr Ashdown's private life. Having canvassed the reaction of each member of the Cabinet, it said they all denied any knowledge of the matter.
Sir Norman told Mr Kennedy last night that in the light of that comprehensive statement: 'The matter is now closed.'
But Mr Kennedy issued an angry counter-statement, in which he said: 'This is a response of breath-taking arrogance. Apparently closed minds behind avowedly closed doors is scarcely the best advertisement for John Major's more open style of politics and government. The public must form their own conclusion.'
In his initial approach, Mr Kennedy told Sir Norman: 'We wish to be reassured that you are taking the necessary steps to discover the truth behind these claims, and are taking the appropriate action within your own party.
'I trust you will agree - should the allegations be substantiated - that the minister involved would not be able to continue in office. Politics in Britain should be conducted in an open and free manner. It is of the utmost importance for the health of our democracy that these suggestions are cleared up once and for all.'
Mr Kennedy told BBC radio: 'The ball rests firmly in the Conservative Party's court.'
Sir David Steel, the former party leader who himself suffered an unsubstantiated smear before the 1987 election, told BBC's World at One: 'If it were the case that there was some kind of dirty tricks unit operating - and let me say, I believe there was - I also believe it wasn't operating at the behest of the command of the Tory Party.
'I think these things happen on a freelance basis and if that was going on then it ought to be exposed and that was the purpose of Charles Kennedy's letter to Norman Fowler; to suggest that they have a meeting and get to the bottom of it.
'I've had one Cabinet minister named to me this morning. I don't know whether it is true or not, but I certainly think it ought to be pursued.'
Mr Kennedy told the Independent: 'In a rational world, it would seem hard to believe that a Cabinet minister could be quite so stupid. But stupidity, or obsession, can become the order of the day in what looks like a very close election.
'I think, given the ferment we're seeing with regard to private conversations across the media at present, in a politically charged situation like an election, it's probably incautious to assume that any conversation is utterly private and shows a measure of desperation.'