Lyell's fate hangs in the balance: Major returns to fresh crisis and Tory anger at Heseltine accusations QBY: COLIN BROWN, Chief Political Correspondent

JOHN MAJOR returned to Britain this morning to face a crisis of confidence in the Attorney General, Sir Nicholas Lyell. The Prime Minister had failed to support the Government's leading law officer unequivocally.

There was an angry backlash from ministerial colleagues at Westminster against Michael Heseltine for his damning evidence to the Scott inquiry into the arms-to-Iraq affair, which left the Attorney General's future hanging in the balance.

Mr Heseltine described how he had objected to signing a Public Interest Immunity (PII) certificate, which he feared would stop ministerial papers being disclosed in the Matrix Churchill case, possibly leading to innocent men being jailed.

One senior minister attacked the President of the Board of Trade as 'that bastard Heseltine' for appearing to undermine Sir Nicholas. Mr Heseltine was seen by Tory MPs to be distancing himself from the indictment of Cabinet colleagues when Lord Justice Scott delivers his report.

The Scott inquiry threatens to further destabilise the Government but senior government sources said its report was unlikely to change the timing of the full-scale reshuffle due in July, although Sir Nicholas and other ministers would be under threat for months.

The Prime Minister left the way open to drop Sir Nicholas when he refused to commit himself fully to supporting him. Asked in Washington if he still had confidence in the Attorney General after Mr Heseltine's evidence, Mr Major insisted he had not yet seen the transcript. He added: 'When I have seen the evidence I might comment, but I think it is a matter for Lord Justice Scott to comment on.'

The Prime Minister's office said Mr Major had confidence in all Government ministers but refused to offer guarantees about Sir Nicholas's future, which Tory MPs said now depended on his performance when giving evidence to the inquiry later this month.

Downing Street said the Prime Minister would wait to see the Scott inquiry report, which is due to be finished in July but could be delayed to give criticised ministers the opportunity to see and correct a draft before it is published in the autumn.

Mr Heseltine was said to be appalled at reports that he had used the Scott inquiry to renew his bid for the Conservative Party leadership at the expense of the Attorney General's

political career.

Sir Nicholas's colleagues said the Attorney General had a strong case to put to the Scott inquiry but they conceded his position had been damaged by Mr Heseltine's evidence.

Paul Henderson, one of the directors freed when the case launched by Customs and Excise collapsed, said: 'I think there are a number of culpable people within the Government among those ministers who have signed PII certificates. I have always believe there was a cover-up . . . Those people who tried to subvert the course of justice should be made responsible.'

Kenneth Clarke, the Chancellor, who has said he will resign if he is criticised by Lord Justice Scott, may also have been undermined, Tory MPs said. 'Heseltine was distancing himself from the flak, but fingering his colleagues, including Ken Clarke,' a Labour leadership source said.

That charge was reinforced in the Commons by Margaret Beckett, the Labour deputy leader, who told MPs: 'The position of the Government's chief legal officer has become increasingly untenable as ministers seem to use him as a scapegoat for saving their own skins.'

Tony Newton, Leader of the House, standing in for Mr Major at Prime Minister's questions, defended Sir Nicholas, insisting his advice to ministers on signing the PIIs had been consistent - a point made by Sir Nicholas when he was forced to issue a statement in his own defence on Monday.

The inquiry will take evidence today from Gerald Hosker, the Treasury solicitor, legal officer at the Department of Trade and Industry when Customs and Excise mounted the prosecution against Matrix Churchill for allegedly trying to sell weapons-making equipment to Iraq.

Fighting on, page 11

Leading article, page 17

Andrew Marr, page 18

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