Dream ends in enemy advance; THE ROUTED RIGHT

The Prime Minister's triumph in the leadership contest left much egg on many faces, report Stephen Castle and Nick Cohen

THERE IS, said one right-winger, only one description of last week's Cabinet reshuffle: "A complete rout."

After 10 days in which John Redwood's right-wing army seemed poised to bring down the Prime Minister, the left has its strongest grip on the top political jobs in living memory. Mr Redwood is on the backbenches, Michael Portillo moves to the politically arid Ministry of Defence, and the only thoroughgoing right-winger to be promoted, Michael Forsyth, will be away from the national stage as Secretary of State for Scotland.

One left-winger said triumphantly: "Ask the right how they intend to respond and they mutter lamely about organising fringe meetings at party conference". A despondent right-winger added: "Perhaps John Major should invite Tony Blair into his Cabinet to restore a bit of right-wing balance."

So where does the right go from here? For Mr Redwood, defeat does have some compensations. His profile as a right-wing standard-bearer has been raised dramatically. Leaving Number One Parliament Street, the modern building which houses MPs' offices, Mr Redwood last week caused heads to turn as bystanders recognised him from television. This was a new sensation for the former Secretary of State for Wales.

Moreover, with 89 votes behind him, he is a clear challenger for the leadership of his wing of the party. The backbenches will give him ample scope, not least for cultivating those MPs who, he calculates, are likely to stay in Parliament after the next election. As one colleague put it: "It is a long time since there has been a genuine right-wing intellect and heavyweight carving out an agenda on the backbenches."

For Mr Redwood's chief right-wing rival, Mr Portillo, the future is not so rosy. The right has criticised him for failing to show the guts that Mr Redwood displayed in resigning and fighting. And not only colleagues are angry; Rupert Murdoch, some of whose papers were gearing up to support a Portillo challenge, is said to be disappointed.

The left is also deeply suspicious of him, partly because of an apparent attempt by his supporters to set up a campaign headquarters in Lord North Street. Mr Portillo's subsequent refusal to confirm or deny involvement smacked, said one right-winger "of student politics. It is not enough to pledge public loyalty to the Prime Minister, then fail to encourage your supporters to back him".

The Ministry of Defence is a promotion, a big office of state which often serves as an apprenticeship to the Foreign Office. But it presents difficult options: a failure to implement further cuts opens up accusations of going soft, a tough spending regime will upset that most powerful of Tory interest groups, the chiefs of staff, and there is little scope for involvement in economic and European debates. As one ex-minister put it: "The only clear blue water he will be seeing is off the coast of Bosnia."

Interestingly, the leadership campaign left most of the debates on the right unresolved, concentrating more on Mr Major's leadership style and rhetoric. Mr Redwood's agenda was more Eurosceptic than Mr Major's - it ruled out a single currency- and more populist, backing capital punishment and calling for the royal yatcht to be saved. But few big policy differences emerged. Instead of opting for a Newt Gingrich-style dismantling of the state, Mr Redwood called for smaller scale reductions in the role of government, and lower tax.

According to Daniel Finkelstein, director of the Social Market Foundation, a free-market think-tank: "The right has to decide whether it wants to tack to the mainstream or move trenchantly rightwards, which may separate it from the electorate."

On the backbenches Mr Redwood may move further in the Gingrich direction. Mr Portillo would then have to decide whether to position himself as the centre-right candidate or follow suit. The centre-right territory is currently occupied by Peter Lilley, Secretary of State for Social Security, who is arguing for gradual reform of the welfare state rather than big cuts.

The less cerebral right-wing element on the backbenches is keeping its head down but, many wonder, for how long? As one left-winger put it: "In the longer term there must be a question-mark over that. The difficulty is that, where once we knew that the whipless MPs numbered nine, we now know that Mr Redwood's backers number 89."

Whatever the length of the truce, right-wingers found one thing with which to comfort themselves: the Government's unpopularity. "The only consolation," said one last week, "is that when we lose the next election we can blame it on this SDP-style Cabinet, and get back to restoring a proper right-wing Conservative party."