Portillo captures Tory hearts: Right wing acclaims another attack on Brussels as Heseltine rises to Lamont's challenge

MICHAEL PORTILLO launched himself as the undisputed champion of the party's new right yesterday as Michael Heseltine boldly led a concerted fight to steer an overtly Euro-sceptic party conference back to the centre ground.

Mr Portillo, Secretary of State for Employment, won the most enthusiastic ovation of the conference so far after a speech pledging to 'stop the rot in Brussels' and declaring: 'If ever there is a conflict between jobs in Britain and toeing the line in Europe, jobs in Britain will win with me every time.'

He delighted the conference with a reference to the sharply contrasting call by the Foreign Secretary on Tuesday for the party not to be xenophobic, by declaring: 'Putting Britain first isn't xenophobic; as Douglas Hurd said, Conservatives are not xenophobic. We are patriotic.'

But the continuing divisions at Cabinet level over Europe were underlined when Mr Heseltine, the President of the Board of Trade, said: 'Our choice is to influence what is happening - or let others set the rules.'

In what Mr Heseltine's colleagues read as a direct response to the speech by Norman Lamont on Tuesday, which raised the prospect of Britain leaving the EU, he said: 'Turning our backs or simply opting out would be the most abject surrender of national interest.'

In a characteristically barnstorming speech, his first to the conference since his heart attack robbed him of a platform last year, Mr Heseltine declared: 'That is why the Prime Minister is right to talk of a Britain at the heart of Europe.'

Mr Heseltine went his farthest yet in making clear his determination to see the privatisation of the Royal Mail in the next Parliamentary session - an issue still to be decided by Cabinet ministers after this week.

The Government will have difficulty commanding a majority for radical measures since the death yesterday of John Blackburn, Tory MP for Dudley West, brought its majority down to 14.

At a right-wing fringe meeting Mr Portillo did not fulfil the worst fears of both Downing Street and the Cabinet centre-left by overtly seeking to push the party farther to the right on domestic policy. Instead he used his speech for an excoriating attack on Tony Blair, the Labour leader, affirming that 'if Labour were to adopt every Conservative policy there would still be a yawning gulf between the two parties'.

In response to questions at the meeting on Europe, Mr Portillo was careful to stop well short of endorsing Mr Lamont's suggestion that Britain might have to leave the EU if it could not resist proposals for further integration.

Michael Howard, the Home Secretary, used another fringe meeting to praise Margaret Thatcher for her electoral victories. Her vision had not been achieved by occupying the middle ground, he added.

However, the implication that the Government should embark on another dose of right-wing radicalism is unlikely to find favour with party managers who are already struck by research showing that while Tory defectors are strongly right- wing on law and order, they are much less so on education and the NHS.

Kenneth Clarke, the Chancellor, will also today head off right-wing calls for tax cuts in next month's budget while making it clear that they remain the Government's goal when national finances allow.