Heseltine moves to steady Tory nerves

Michael Heseltine, the Deputy Prime Minister, yesterday tried to steady Tory nerves over the Budget. He defended Kenneth Clarke as a "rock of a Chancellor" and confirmed John Major was not planning to go to the country before 1997.

It came as Labour prepared tomorrow to abstain on the 1p cut in the 25p standard rate of income tax, in spite of misgivings from left-wingers in the Labour rank and file.

Labour's refusal to vote against the cut in income tax will be a lifeline for ministers who are worried by the failure of the Budget to rekindle the "feelgood" factor with the voters.

Mr Heseltine said in the clearest terms so far that Mr Clarke "certainly" had another Budget ahead of him, with a clear hint that it will offer a bigger pre-election boost to the economy.

Answering criticism that the Chancellor had failed to live up to the expectations of big tax cuts, Mr Heseltine said: "Ken Clarke is not a panicky Chancellor. He doesn't stand there looking edgy and nervous and as though he's going to bow to any whim that happens to be passing. He's a rock of a Chancellor and the fact is that he knows exactly what he's doing."

Mr Heseltine also went out of his way to praise the Prime Minister. "He may not be the most flamboyant Prime Minister that this country has ever had, but he will prove to have been one of the most successful," he said.

The Independent has learnt that senior Conservative MPs have started the review of the rules for the leadership election to head off the threat of any further challenge.

The officers of the 1922 Committee of Conservative MPs at a meeting last Thursday agreed to begin the review. A sub-committee, chaired by Sir Marcus Fox, the chairman of the 1922 Committee, is expected to report back next year.

Some senior Tories want to halt any threat of a leadership challenge to any sitting Tory Prime Minister. The changes are unlikely to be in place by next November, when the next challenge could be made under the existing rules, but senior members hope the review will put off the threat of a challenge.

Few Tory MPs have the stomach for another leadership contest, after Mr Major's victory over John Redwood in July, but some still believe that he will be forced out after Tory losses in next year's May local elections. Mr Major made it clear in a BBC2 Newsnight interview that he would not step down.

The failure of the Government to lift itself off the bottom after the Budget is causing deep anxiety in the party. A MORI poll for BBC2's Money Programme last night showed that 57 per cent had registered no change in their feelings after the Budget.

Tory leaders yesterday sought to calm nerves by insisting that the effects of the Budget would begin to be felt before long. Brian Mawhinney, the party chairman, said cuts in interest rates and mortgage rates were in the offing.

Officially, Labour will vote against the overall package of the Budget, but abstain on the individual tax proposals. A Labour amendment attacks the Chancellor for failing to introduce a windfall profits tax on the privatised utilities.

Ministers intend to exploit any split in Labour's vote on the Budget as further evidence that Tony Blair has adopted Tory policies while a left-wing rump has not changed. Paddy Ashdown and the Liberal Democrats are voting against the Government.

However, ministers will be denied the prospect of any large-scale split in the Labour ranks. The 40-strong Campaign Group of Labour MPs is divided and only a small number of left-wingers are planning to vote against the cut.

The vast majority of the Labour party will obey the leadership whip by abstaining. A key member of the Campaign Group said: "I was out last night on a housing estate and a lot of people said with Christmas coming up that a 1p cut is better than nothing. I could not argue against that, so I won't be voting against it. I think only a couple will vote against it."

Last night John Prescott, the deputy Labour leader, challenged Dr Mawhinney over a claim that people would be pounds 9 a week better off. He said it could only be achieved with pay rises averaging 4 per cent, which was higher than the inflation rate.