A creeping conviction within the Cabinet room

THEY have ears and they can hear. They are flesh and they can be hurt. They are human - and they wonder, too. Yesterday, the Cabinet met for what Downing Street calls a routine discussion and the rest of us call a crisis meeting (in these bad times, both descriptions fit). They smiled and waved and nodded to the cameras as they arrived. No coups are coming. No sudden collapse into an election, either. But around the table were some alarmed people. The debate about economic policy is over, says the Treasury. But it isn't.

Until the coal closures were announced, it seemed clear that there would be little further said on economic policy, and the Government would concentrate on a glorious victory over the anti-Maastricht rebels instead. On the economy, there was a sort of policy gridlock: the ambitions of those who wanted Britain back into the exchange rate mechanism and the anti-inflationary beliefs that are at the centre of John Major's political character blocked interest rate cuts. But the ERM fiasco meant a tough public spending round - so there would be no money for boosting investment or helping the housing market, or any other fiscal painkillers. There was no alternative but to sit silently, and wait.

Public and party outrage about the coal closures may break the silence in the Cabinet. To most Britons, it matters far more than Maastricht. At yesterday's meeting, Michael Heseltine issued a general call to arms - to microphones, rather - but, by some accounts, got a rather rough ride himself for his handling of the announcement. That probably reflected a more general mood: beneath the theatricals and tetchiness, though, there seems to be a creeping conviction that things cannot go on like this.

They can, of course, up to a point. Tory dissidents are not ready to commit political suicide. Nor can there be a serious challenge to Mr Major because there is no serious challenger. Imagine the turmoil if Mr Heseltine were still prowling outside the Government, urging a 'proper industrial strategy'. He would have at least half the Tory party, and perhaps two-thirds, ready to make him leader by acclamation tomorrow. Tantantara] Instead, his feet are tucked safely under the Cabinet table. Oh, well.

There, he is in a relatively weak position. At that table, he is an exception when it comes to an interventionist industrial policy. Worse, he is on the side of conventional wisdom so far as monetary policy goes. He has been issuing firm private warnings about the danger of resurgent inflation. His critics - no doubt mean-mindedly - translate them into a determination to get back into the ERM quickly, at any interest rate cost. But there we are: lonely on interventionism and loyal on interest rates. He may be enjoying the adrenalin rush of the crisis. But he is no rebel.

The bigger threat to the conventional wisdom comes from the right. Just as the No 10 and Treasury advisers are still trying to keep half an eye on the exchange rate, so the right wants to ignore it altogether. Let it go hang. And if, as a result of lower interest rates, the economy does start to recover, why then the real economy will allow a level of sterling at which re-entry to the ERM would become possible (if, from their point of view, wrong).

So the worse the industrial crisis, the stronger the hand of neo-Thatcherites such as Michael Howard, Peter Lilley and Michael Portillo. They are closest to the outspoken right-wing critics of the Government (like you-know-who). They were badly damaged by the crudity of the Tebbit revolt at conference last week and up to now they have seemed an almost irrelevant minority rump, outgunned and outclassed by the European gang.

This may be changing. If something must be done, cutting interest rates and risking inflation is the easiest way to do it. At the moment rates are well below what they would need to be to keep the pound tracking the ERM - but above what most economists believe the real economy (somewhere between 'critical' and 'passing away peacefully') requires. Pressure is growing throughout the Conservative party for a cut in rates and criticism of the Treasury advisers is becoming vitriolic, even from some senior ministers. Neo- Thatcherism and the instincts of pragmatic, middle-of-the-road ministers, shell-shocked by the past few weeks, are starting to coincide. This suggests a significant change in the mood and political direction of the Cabinet.

Both the Chancellor and the Prime Minister are poised between the neo- Thatcherites and the Europeans. They are two party men, keen readers of the mood of Conservatives in Parliament. It is still more likely than not that they will stick with the Kenneth Clarke-Michael Heseltine view of the world. But it is no longer inevitable. Norman Lamont has his feet in both camps and so, as his speech at Brighton showed, does Mr Major. Could he really lead his party away from a tough, anti-inflationary stance, focussed on the exchange rate?

A switch in policy of the kind I have been outlining would be extraordinary - a break as significant, perhaps more so, as devaluation itself. But these are wild times. Under their professional exterior calm, ministers are as disturbed and self- questioning as rational beings ought to be. Something profound has been happening to the political mood of the country. Something is happening in the Cabinet, too.