David Cameron risked a major blow to his authority after he defended one of his closest friends over claims that he had described Tory activists as "mad, swivel-eyed loons".
The Conservative co-chairman Lord Feldman, a tennis partner of the Prime Minister, was forced to deny making the remarkable attack on party members, which reportedly arose during a conversation with journalists at an event in London.
The peer, who attended Oxford University with Mr Cameron, said it was "completely untrue" that he made the derogatory remarks that several newspapers reported as being made by an unnamed member of Mr Cameron's inner circle. Downing Street later announced that the Prime Minister was backing his friend.
But both The Times and The Daily Telegraph, which put the incendiary remarks on their front pages yesterday without naming Lord Feldman as the alleged source, last night said they stood by the story – threatening an extraordinary stand-off between Downing Street and newspapers.
The row deepened the bitter internal schism between Mr Cameron's inner circle and the rest of the party – particularly over issues including the European Union and gay marriage.
The UK Independence Party, which has been mopping up support from disenchanted Tory voters in recent months, immediately seized on the dispute. Its leader, Nigel Farage, remarked: "If you are a Conservative supporter who believes in Ukip ideas then your party hates you. Come and join us."
The dispute has erupted at a difficult time in No 10's relationship with the press, as they haggle over future media regulation in the wake of the Leveson report.
Tory activists and MPs called on Mr Cameron to identify the individual responsible for the outburst and throw them out of the party.
Ben Harris-Quinney, director of Conservative Grassroots, a network of local Tories, said the aide responsible should: "Go and go quickly." He added: "These are very disagreeable comments which come at a very delicate time for the party. It just reinforces the idea that the party is being run by a metropolitan elite who display nothing but disdain for their own members, grassroots and even MPs."
The Conservative MP Nadine Dorries, who sparked fury when she complained that the party was being run by "posh boys", said that any senior Tory denouncing activists in such dismissive terms should be punished.
"If I had made that comment I would have been disciplined," she said. "My activists are decent, hard-working people and they are very far from 'swivel-eyed loons'.
"Whoever has made that description, attacking the people we expect to vote for us, is as far removed from normal society as it is possible to be."
The Tory MP Peter Bone said: "Clearly, anyone who takes these views could not possibly want to remain a member of the Conservative Party, even less still want to advise the Prime Minister."
As speculation that Lord Feldman was the source of the comments mounted on social media sites, he issued a statement denying he was responsible, adding: "I would like to make it quite clear that I did not, nor have I ever, described our associations in this way or in any similar manner. Nor do these alleged comments represent my view of our activists.
"On the contrary, in the last eight years of working for the party, I have found them to be hard-working, committed and reasonable people. They are without question the backbone of the party. I am very disappointed by the behaviour of the journalists involved, who have allowed rumour and innuendo to take hold by not putting these allegations to me before publication. I am taking legal advice."
In a co-ordinated counter-attack, Downing Street backed Lord Feldman, while his fellow co-chairman, Grant Shapps, insisted his colleague was a "very honourable guy" who would never criticise the "heroes" who work at the party grassroots.
Mr Shapps compared the row with the "plebgate" stories surrounding the former chief whip Andrew Mitchell and separate allegations against Lord McAlpine that have resulted in libel claims.
The Conservatives conceded that Lord Feldman was at the restaurant at the heart of the row, the Blue Boar Smokehouse at the InterContinental Hotel in St James's, central London, attending a Conservative Friends of Pakistan event. It is alleged that the peer made the remarks to journalists who were also dining there.
The newspapers that published articles about the exchange yesterday stood by their stories. The Daily Telegraph editor, Tony Gallagher, tweeted: "For the record, the Telegraph stands by the swivel-eyed loon splash."
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