Tory MPs expect job switch for Lamont: After 'Black Wednesday' Conservatives believe that a new Chancellor will be needed. Colin Brown reports

THE CONSENSUS among Conservative MPs is that Norman Lamont's days as Chancellor are numbered - but now is not the time for him to go. Asked as he emerged from the Cabinet whether he was resigning, Mr Lamont said: 'Of course not.'

Mr Lamont will urge the 'Euro-sceptics' in the party to support the Maastricht treaty at the party conference next week. Although John Major left the Cabinet in no doubt that he expects them to stick to the agreed policy and avoid the splits of recent days, Mr Lamont will have no difficulty embracing the Maastricht treaty.

The Chancellor will use a lecture at a fringe meeting on Wednesday evening to declare his support, as a self-confessed 'sceptic', for the treaty because of its protection of our national identity.

But he would have more difficulty, along with some other Cabinet ministers, in accepting an early return to the exchange rate mechanism, which poses the real threat to Cabinet unity.

Mr Lamont's speech had to be rewritten after 'Black Wednesday'. He will tackle the ERM issue in his conference speech on the economy on Thursday. He will defend his position and explain the decision to withdraw sterling from the ERM.

It is expected that he will also make it clear that there can be no early return to the ERM and will not put a date on re-entry. Although that is the agreed line, a delay running to years will test the loyalty of some Cabinet ministers who are enthusiastic about being inside the ERM.

The speech will be seen as a make-or-break event for Mr Lamont's career. But he will be preaching to the converted. The party representatives are not enthusiastic Europhiles. Party leaders believe the Tory rank and file are more concerned about the recession at home than with Europe.

Ministerial sources said they would want assurances that outside the ERM Mr Lamont was going to follow policies that would which stop the slaughter of small businesses, with some prospect of a further, early cut in interest rates.

Party leaders want to use the conference to lift the Tories out of the European doldrums with policy announcements on law and order and education. 'This is the first conference since the general election. A lot of people will want to celebrate the fact that we won and we are still in government,' one senior party source said.

But for public expenditure, the party is well and truly over. The conference is taking place against a background of the most savage cuts for more than a decade.

The Chancellor yesterday chaired a meeting of the Cabinet public expenditure committee, which went through the schemes which will have to be cut.

The European fighter aircraft may be a victim of the capital spending cuts. Michael Heseltine, the President of the Board of Trade, and Kenneth Clarke, the Home Secretary, have privately warned about the loss of jobs, but Michael Portillo, the Chief Secretary to the Treasury, put forward radical options for cuts, which could be more unpopular.

The devaluation of sterling has intensified the need for deeper cuts. Mr Major said: 'Clearly, with the exchange rate at a lower level, we will have to maintain a tight fiscal policy.'

When he makes his Autumn Statement spelling out where the cuts will fall, the cries will go up again for Mr Lamont's head. But he is confident he has the united support of most Tory MPs and the Cabinet. It was only a week ago - that Mr Lamont was given a desk- thumping demonstration of support from the Tory backbench finance committee.

Friends deny any split between the Chancellor and the Prime Minister. 'There is not a fag paper of difference between Norman and John Major,' one said.

The European leaders, with whom Mr Major was busy rebuilding bridges on Wednesday, may be disturbed to hear that. But they may be more worried about the long-term plans Mr Major is believed to have for his Chancellor.

When Mr Major decides to dispense with his Chancellor, expected in the next full-scale reshuffle next year, Tory MPs believe Mr Lamont will be made Foreign Secretary.

'Discredited' Lamont, page 6

(Photograph omitted)