The Labour leadership regards Michael Heseltine, the President of the Board of Trade, as marginally the strongest potential Conservative leader, and for that reason expects him to become prime minister after a second ballot on 11 July.
Tony Blair, the Labour leader, has been reported twice this year as "putting his party on a war footing" for a snap general election this autumn against a Tory party led by Mr Heseltine.
"We still expect it to be Heseltine," said a spokesman for Mr Blair yesterday. "But we've done a lot of research on him since then, and people do see him as unreliable and they see him as yesterday's man."
Since Mr Blair was elected Labour leader last July, the Conservatives have had difficulty in attacking him. Mr Major has seemed divided between accusing him of being an opportunistic Tory look-alike or a genuine convert imprisoned by a socialist party.
Mr Heseltine is the only leading Tory who has laid a glove on him, launching an extravagant attack on Mr Blair last September: "Why should you believe a man who has got all the major judgments wrong in the first half of his life, when he tells you he is going to get them all right in the second half of his life?"
He attacked Mr Blair's past positions on CND, trade union law, privatisation and low taxes, prompting an inaccurate denial of his CND membership from Mr Blair's office. In contrast to the party atmosphere at Westminster among Labour backbenchers, the spokesman admitted that Mr Blair felt "a mild sense of frustration that, for the first time since he became leader, he is not setting the agenda".
The Labour leader's advisers are aware that the change of Tory leader in 1990, drove the Labour Party off the front pages and allowed John Major to present himself as someone who could unite the party and the country.
"We have got to remain visible - last time the Labour Party just disappeared," said the spokesman. "If a new [Conservative] leader arrives we have got to make sure that he is seen not as a renewal but as further evidence of their terminal decline. We are going to remained focused right through this on the divisions in the Tory party."
The best outcome from the opposition's point of view, according to the spokesman, would be a win for a "bloodied John Major". He dismissed the idea that Mr Blair would privately be backing John Redwood, the former Welsh Secretary: "Redwood of all of them could just about get away with presenting himself as change."
The Labour Party has also conducted research into public attitudes to Michael Portillo, the undeclared and more substantial candidate of the Tory right, which is said to contradict the findings of research carried out by the BBC for last week's Panorama profile of him. That research found floating voters were "won over" when exposed to him.
Labour's research, among former Tories who now intend to vote Labour, is said to have found that Mr Portillo produces "really strong, almost physical reactions" against him.
Labour is also tracking public opinion throughout the Tory leadership election. A source said: "The people are saying two things: 'Who is running the country?' and 'What the hell is going on?'"
Sources at Labour headquarters in Walworth Road said: "All the mud that the Tories are throwing at each other will be thrown back at them."
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