Profile: Cutback kid grits his teeth: Michael Portillo: The Treasury Chief Secretary is tipped for the top but a political storm over benefits may spoil the ride

THREE YEARS ago Michael Portillo, then a transport minister, was considering whether to deregulate London taxis. The black cab trade seemed an inviting target for a young Thatcherite minister making his name. Here was a quasi-monopoly protected by century-old legislation and with its prices fixed by law. What could be more free-market-orientated than to allow minicabs to compete directly with licensed taxis? But then in stepped Margaret Thatcher herself. She had, she said, been talking to 'one of my cab drivers' in Finchley. Was it true that he was contemplating deregulation? Well, yes, he was conducting a review. Mrs Thatcher was characteristically succinct. 'Drop it', she told him.

As an issue, London taxis hardly compares with the most searching review of welfare spending since the war. Yet the parallels with last week when, as Treasury Chief Secretary, Portillo found himself at the centre of the biggest political storm of his career, are seductive. Once again Portillo is under fire for merely considering potentially unpopular options. The difference is that this time Portillo has no intention of 'dropping it'.

Ironically, only last Wednesday, Portillo had been complaining that the public finances seemed to many too 'technical and arcane an issue' to 'garner many headlines'. Yet by Thursday morning he had all the headlines he could want, thanks to a leak that ending pensioners' and children's automatic right to free prescriptions was among the options for means-testing benefits, as part of his drive to bring down borrowing. Portillo was quick to tell ITN that prescription charges were not top of his agenda, but refused to rule out any of the options for reducing state spending. Government whips blanched as they calculated the number of pensioners in Christchurch, where the Tories face their next by-election. In a BBC interview, Jerry Hayes, MP for Harlow, expressed the views of many of his jittery colleagues when he said: 'What we have to avoid is the Sam Peckinpah scenario of going into the OK Corral and shooting everything in sight including our own supporters.' Another backbencher was even blunter: 'I thought Portillo was ambitious. He's blown it.'

MICHAEL Denzil Xavier Portillo, born 40 years ago this Wednesday, has a remarkable family background for a man so frequently tipped as a future Tory leader. His father was a brave and brilliant Castilian poet and intellectual who fled to London, speaking no English, at the end of the Spanish civil war after fighting against Franco. He grew up in an emotionally left-of-centre household (his charming, if slightly eccentric, Scottish mother was an active SDP member in the 1980s). Famously, he had a portrait of Harold Wilson on his bedroom wall while a schoolboy at Harrow County School.

Portillo's year was extraordinary by any standards. It included Clive Anderson, the actor Francis Matthews, and Nigel Scheinwald, a fast-rising Foreign Office man. Their friendship - which survives today - was forged on a common enthusiasm for revue and drama. By his own confession Portillo could not act, but he was the producer and organiser. He was handsome, then as now (he was first seen on television at the age of eight as the Ribena Kid), and gregarious. One friend, however, remembers his reserve and occasional flashes of temper, still the subject of comment 20 years later.

What 'turned' him politically was Cambridge, or more precisely Peterhouse and the Conservative don who held court among Portillo and his fellow historians, Maurice Cowling. This was the time of the 1974 miners' strike, but it was not so much outside events as Cowling's teaching that influenced him. He wanted a job in the private sector, so he joined an air freight business at Heathrow as a management trainee. But he was bored and miserable and telephoned Cowling for advice. Cowling said: 'Well if you'd been interested in politics I would have suggested that you go to Conservative Central Office.' Portillo replied: 'But I am interested in politics.' Cowling, delighted, secured him a job in the research department under Chris Patten.

He shone quickly at Central Office, though occasionally he would anxiously confide in colleagues that he was not sure that Patten liked him. In fact Patten influenced him more in style than in politics. A greater political influence was John Biffen, whom he advised as the Opposition energy spokesman, a Tory intellectual and one of the earliest monetarists. Then in 1979 he had a real break. He was chosen for the exhausting but exciting task of briefing Mrs Thatcher each day of the general election campaign on the morning's newspapers and the suggested 'lines to take' in press conferences. It was a delicate task; you had to tell the bad news without disheartening the party leader. He did it with supreme efficiency and tact. Even so, a tense Mrs Thatcher told him one morning: 'You're battering me Michael, you're battering me.' He replied: 'Well I have to pretend that I'm Fred Emery (then the terrier-like political editor of the Times).' Mrs Thatcher flashed him a smile. 'Ah, but Fred Emery isn't clever like you.' This was heady stuff for a raw 26-year-old. He could hardly fail to fall under her spell. After the election he became special adviser to David Howell, the new Energy Secretary. It was the first rung on a ladder which put him in the Cabinet 11 years later - at just 38.

In 1982 he married Carolyn Eadie, whom he had known at school. She is a high-earning headhunter at Spencer Stuart and the antithesis of the meek political wife. She can get irritated at the amount of time, including weekends, consumed by Portillo's career. They enjoy eating and drinking - moderately but very well - in good hotels, and going to the opera. He and Carolyn have no children but Portillo is a strong family man with three brothers who are fearless about teasing him on the Government's travails. He and his parents remain close despite their political differences.

THE SON of an immigrant, he is nevertheless, in the words of one colleague, 'more British than the British'. He is intensely patriotic, a deep Euro-sceptic and pro-hanging. But he has no trace of the racial prejudice of some colleagues on the right. He took up the case of his Enfield Southgate constituent Engin Raghip, one of the three accused of PC Keith Blakelock's murder, and was influential in securing a review by the Home Office.

On economic policy, however, he remains dry. As the minister charged first with defending the hated poll tax, and then with ushering in its replacement, he has faced controversy before. While he may never have been in the eye of the storm until last week, he has seen at close quarters how political careers can be broken. He saw how John Moore - for whom he worked as a junior social security minister - became a victim of his own advance publicity, and vowed he would never make the same mistakes. He also witnessed at close quarters the demise of the leader who so favoured him. On that dark evening in November 1990, when, one by one, Mrs Thatcher's Cabinet told her that she could not win a second leadership ballot, Portillo joined a deputation to make a last-ditch effort to persuade her otherwise. The legend is that he threatened to knock over the portly Peter Morrison, who had run a gruesomely inefficient campaign for her, unless he admitted him. She was - just - in control but evidently distressed. Portillo, by contrast, was angry. He told her that her lieutenants had made a mess, and he was convinced she could win the second time. But it was too late; and he would spend much of the evening helping her to write her resignation speech.

Unlike other former Thatcher loyalists, he played no part in the leadership campaign. He voted for John Major but believed it would be discreditable to campaign for him. Yet after the fall, he still got on well with Michael Hes eltine, her political assassin. Oddly, Sir Edward Heath is among his admirers.

The claim that Portillo has now 'blown it' is wishful thinking by the Tory left. Nevertheless his career is at the crossroads. He faces the problem of dealing with a massive borrowing requirement and a small parliamentary majority. He cannot be sure that any of the more radical proposals under discussion will secure Commons approval. He is probably unsure whether the leaks will eventually work in his interest by 'softening up' the electorate for radical change or make it more difficult to cut spending in the longer term.

There are two views about Portillo's eventual leadership prospects. One is that the new generation of MPs who grew up politically under Thatcher will gradually shift the party to the right and form a natural base from which Portillo can reach the top. The other is that the times are against him - and them. In the Eighties, the ideologues of Thatcherism were the populists but, in the words of one senior Tory, 'the populists are no longer popular'.

Critics who complain that Portillo knows nothing of the world outside Whitehall and Westminster are not quite fair. He worked between 1981 and 1983 for Kerr Magee, an oil company. But there remains a question mark over his sensitivity to the world outside. He has charm, but also according to a colleague, a certain 'Castilian hauteur.' He has to show he has the politics as well as the character and ability to reach the top. One close ministerial friend suggested last week that he needs to broaden his political base beyond the Tory right if he is to rise to the top. It may not be his fault, but last week did not help him do that.

(Photograph omitted)