Exit of top aide underlines weakness of Duncan Smith

When Iain Duncan Smith was asked on Breakfast with Frost two weeks ago whether Barry Legg would be removed from his post of chief executive of the Tory Party, his answer was categoric.

It was "complete nonsense" to suggest his close friend and fellow Maastricht rebel would somehow be blocked by the party's ruling board, he said. "I've already had him confirmed into post," he added, for good measure.

Last night, as Mr Legg's departure underlined the weakness of Mr Duncan Smith's own leadership, those words returned to haunt him.

After just 79 days in post, the right-wing former Tory MP was forced to quit not just as chief executive but also as the leader's personal chief of staff. An apparently trivial internal row over backroom boys became a huge blow to the leader's authority.

Officially, party officials announced the post of chief executive was abolished after a "strategic review" of Central Office organisation by the board.

The formalities followed the usual pattern. Mr Duncan Smith thanked Mr Legg for his work and, in a statement, the outgoing chief executive said he was "sorry to be leaving so soon".

But nobody at Westminster was fooled and many Tory backbenchers shook their heads in dismay at what they viewed as the inevitable conclusion of Mr Duncan Smith's initial decision to appoint his old pal to such a top job. The resignation followed frantic negotiations on the terms of his departure. The sticking point seemed to be hard cash because Mr Legg's lawyers were demanding £160,000 in a settlement.

One member of the Shadow Cabinet suggested the resignation "would not cost the party a penny" and some insiders claimed that Sir Stanley Kalms, the party treasurer and founder of Dixons and PC World, had dug into his deep pockets to fund the pay-off.

Given that Sir Stanley, with other members of the board, was among the prime movers in the ousting of Mr Legg, such a move would confirm in stark terms the power he holds over the Tory leader. "He who has the gold makes the rules," one insider said.

But the root of the problem for Mr Duncan Smith also lay in the fact that another veteran Tory, Derek Conway, had crossed swords with Mr Legg a while back in December 2000. Mr Conway, a former whip in John Major's Government, had stoicly endured the antics of Maastrict rebels such as Mr Duncan Smith and Mr Legg in the 1990s.

Back in 2000, Mr Conway was up against Mr Legg in the selection for the safe seat of Old Bexley and Sidcup when it emerged that one of the candidates for the seat was rumoured to have tried to join the UK Independence Party. Mr Legg denied any formal contact but looked shaken and off-form. Mr Conway went on to win the seat but did not forget the incident.

On 14 February 2003, just as Hans Blix was due to deliver one of his reports to the UN Security Council, Mr Legg's name cropped up again. In a Valentine's Day Massacre of the modernisers, Mark MacGregor had been sacked by Mr Duncan Smith by phone while he was on holiday in Paris and replaced by Mr Legg – it was a swift and decisive blow.

Mr Legg made only a few brief visits to Conservative Central Office before the ruling board made clear it was furious at being bypassed in the chief executive appointment. Under the Tory constitution, the board has to approve the post but the leader went ahead anyway. Theresa May, the chairman, was presented with the move as a fait accompli.

When also told the news that Stephen Gilbert, the party's long-serving campaigns chief, was being ousted, the board was in uproar. Michael Portillo, aggrieved at the removal of his friend Mr MacGregor, saw his chance and publicly attacked Mr Duncan Smith for a serious self-inflicted wound. A serious leader ought to surround himself with "tall grasses", Mr Portillo said.

Mr Duncan Smith famously tried to laugh off the controversy as "meaningless" in a Today programme interview but, as the weeks went by, it was clear that the board would assert its own authority in an unprecedented challenge to the leader.

Even without the appearance this week of old stories ont Mr Legg's past involvement in the placing of homeless families in asbestos-ridden flats or an £18m pension raid on a firm of which he was company secretary, the board was determined to act.

The total cost of the pay-offs to a string of staff hired or promoted by Mr Duncan Smith and then let go now tops half a million pounds, senior sources told The Independent.

"The problem now is who on earth would want the job of Chief of Staff after what has happened." an MP said

One insider revealed that Mr Legg was in Warsaw yesterday when he was finally told to go. David Davis was in Florida when he was sacked as party chairman by Mr Duncan Smith, Mr MacGregor was in Paris when he received his marching orders. "Anyone who gets a call abroad in future will be very, very nervous," one MP joked last night.