PM's think tank faces fundamental shake-up

THE PRIME Minister's think tank at 10 Downing Street, headed by Sarah Hogg, faces a fundamental shake-up following attacks on its performance by Conservative MPs.

Ms Hogg and the Conservative Party chairman, Sir Norman Fowler, have taken the brunt of the criticism, registered by Government whips and other senior Tories in an informal, end-of-term consultation exercise. The attacks on two of Mr Major's closest aides indicate the difficulty of the Prime Minister's own position in the wake of the Maastricht votes and the disastrous Christchurch by-election.

The Number 10 Policy Unit was accused of developing a 'bunker mentality' and being permanently on the defensive. Some Conservative MPs believe it to be preoccupied with producing instant solutions to ward off criticism, rather than producing long-term strategy and thinking. One senior Tory said: 'People are supportive of the Prime Minister but are worried about the advice being offered.' Another said the unit dealt unsurely with ideas submitted to it because it was uncertain about the approach the Prime Minister wanted.

Mr Major today re-opens the divisive debate over public spending, making another reference to the need for targeting welfare benefits in an article which warns of 'tough decisions' in the Government's spending round. In today's News of the World Mr Major writes: 'We must ensure the really needy get all the help they deserve. But we also need to make sure we are not giving taxpayers' money - your money - to people who do not need it. This will involve some tough decisions.'

Mr Major is thought unlikely to part company with Ms Hogg, one of the most influential advisers in Whitehall, but changes to the policy unit are seen as highly likely.

Sir Norman is also thought to be safe in his job for the time being, although Conservative MPs are critical of his comments after Norman Lamont's departure from the Cabinet. There is also anger among constituency agents and party workers at the way Central Office has been operating.

Sir Norman has been slimming down the party structure, making many agents redundant, in an attempt to bring the party's finances under control.

The threatened imposition of VAT on fuel was blamed for the Christchurch rout, although MPs seemed divided on whether a U-turn would help or hinder the party's image.

With Mr Major facing a testing party conference, the parliamentary party remains divided over Europe, with some loyalist MPs dismayed by the Government's attempts to open a greater dialogue with its Euro-rebels. Any attempt to bring hardened Euro-sceptics back into government would produce a backlash among MPs who supported Mr Major loyally over Maastricht.

Meanwhile, the problems facing Kenneth Clarke, the Chancellor, were underlined by reports that he is considering limiting tax relief on personal allowances to 20 per cent. Technically, the move would not breach manifesto pledges because tax rates would not be raised.

Another possibility is thought to be an increase in tax rates for very high earners.

Although this would bring in relatively small amounts of additional revenue, it would be politically easier to achieve.

(Photograph omitted)