The Cabinet Reshuffle: Sacked - Tom Irvine after 42 years at Swan Hunter and Norman Lamont after 30 months in charge of the British economy: Major gambles on Clarke as Chancellor

JOHN MAJOR sacked Norman Lamont as Chancellor of the Exchequer yesterday, replacing him with Kenneth Clarke, a strongly pro-European heavyweight who was last night considered by left and right of the Conservative Party alike as the biggest single threat to the Prime Minister's political survival.

Mr Lamont, having refused the humiliating offer of a transfer to the Department of the Environment, showed the cold depth of his anger when he replied to Mr Major's customary letter of appreciation with an unsigned statement that was dictated by telephone - then faxed - to No 10.

Described by one colleague as 'a burning fuse', Mr Lamont told the Prime Minister that he did not plan 'to make any comment for several weeks' - a clear hint that he would detonate his farewell in the Commons. A former Cabinet colleague said Margaret Thatcher had learnt the gravity of that retaliatory threat after she forced out Sir Geoffrey Howe and Nigel Lawson.

While No 10 added injury to the insult by saying that Mr Major had decided to 'freshen' the Government with the 'right people for the right jobs', John Smith said: 'Mr Major is just as implicated in our economic disasters as is his departing Chancellor.' The Labour leader said: 'Today's reshuffle is a panic measure by the Prime Minister, like the captain of a ship throwing his first mate off the bridge as they head for the rocks.'

For the Liberal Democrats, Paddy Ashdown said what had been needed was not just a change of personnel, but of policy, too. 'Mr Major must now say what he disagreed with in Mr Lamont's performance and policies.'

John Watts, Tory chairman of the Treasury Select Committee, said Mr Lamont was a 'ceremonial sacrifice'. Mr Lamont is expected to seek solace in well-paid City directorships.

While there was strong right-wing concern that Mr Clarke would favour earlier re-entry into the Exchange Rate Mechanism than Mr Lamont, his appointment was described as astute by one of Mr Major's friends - because it created 'a coincidence of interest'. If Mr Clarke shone, Mr Major would survive; if he failed, he could pose no threat as a leadership contender.

However, one of Mr Clarke's left- wing allies said: 'Ken will outshine Major; he'll put him in the shade, wait and see.' A very senior right-winger concurred: 'If Major and Clarke were cast adrift together in a boat, which one would you expect to come back?'

On balance yesterday's Cabinet reshuffle was seen as a tilt to the left, in spite of the promotion of two Thatcherites: Michael Howard moving from Environment to replace Mr Clarke as Home Secretary; and John Redwood moving up into Cabinet, from local government minister to Secretary of State for Wales.

A senior backbench Thatcherite said: 'Labour is moving to the right, and Major moves our right-wingers into departments where they can be destroyed.' A left-wing minister said: 'We've won, old boy.' Few Conservative MPs were persuaded that Mr Major had succeeded in refreshing the government image. To the consternation of some Tories, widely expected moves for John Patten, Secretary of State for Education, and William Waldegrave, Chancellor of the Duchy of Lancaster, did not take place.

Instead, Mr Howard was replaced by John Gummer as Secretary of State for the Environment; his post as Minister of Agriculture was taken by Gillian Shephard; and she was succeeded at Employment by David Hunt from the Welsh Office.

While the right was generally unhappy that Mr Howard had not got the Treasury, where he would have fiercely resisted ERM re-entry, they questioned whether, as Home Secretary, he would carry through the mooted reorganisation of the police. Mr Howard is said to have opposed the proposals to distance police from local authority accountability, which the right has supported.

The Prime Minister's office said that the timing of the reshuffle, which had been decided a week ago, was in part dictated by the fact that preparation was under way for November's Budget - the first to bring tax and spending together. That Budget will provide Mr Clarke with his first big test against the benchmark of an interview with Mr Lamont in yesterday's Guardian, in which the former Chancellor hinted that further tax increases might have been necessary - if he had kept the job.

As the day's events unfolded in Whitehall and Westminster, starting with a deceptively modest statement from No 10, that there would be 'a limited number of changes at all levels', there was been speculation that the left-wing shift of Cabinet would be balanced by a right-wing twist in the lower ranks of the Government. In the event, that did not happen - the newcomers were evenly balanced in terms of politics and departmental weight.

Labour leads the Conservatives by 16 points in a Mori poll published in the Times today. It shows Labour with 44 per cent support, Conservatives 28 per cent and Liberal Democrats 24 per cent.

(Photographs omitted)

Profiles, pages 2, 3

Leading article, page 25

Andrew Marr, page 27

City reaction, page 31

View from City Road, page 33