Who will hold the aces when Major shuffles his pack?: While Norman Lamont fights to stay on as Chancellor, Tory gossip in the tea rooms at Westminster is about winners and losers in a Cabinet reshuffle. Colin Brown has been listening

MICHAEL PORTILLO has emerged as the most favoured long-term candidate for the leadership of the Conservative Party as John Major prepares to shuffle his Cabinet to revive the Government's fortunes.

Mr Portillo is regarded by MPs right across the party as the best hope for the Tories' long-term future. In spite of his right-wing credentials, the Chief Secretary to the Treasury, a founder-member of the Thatcherite No Turning Back Group, is seen by those on the wet wing as a shrewd, tough minister who has quickly matured. But, with his 40th birthday on 26 May, he is still too young for No 10.

His supporters want him to be given charge of a key government spending ministry, such as environment or education, in the reshuffle to gain wider experience to prepare him for taking over from Mr Major in the long term.

Many Tory MPs believe that Mr Major's own position will be made more vulnerable by sacking Norman Lamont, the Chancellor. 'Norman is a lightning conductor. Once he goes, it could strike at John,' a member of the executive of the 1922 Committee of Tory MPs said. Views at Westminster are hardening towards a feeling that in spite of the Chancellor's appeal in Scotland to keep his job, he will have to be moved.

The Prime Minister wants a limited reshuffle of the middle ranks, followed by a radical Cabinet shake- up next year. MPs say if he takes the radical option now, he could replace Mr Lamont with Kenneth Clarke and make Virginia Bottomley the first female Home Secretary. But there would be renewed open warfare with the Tory right if Mr Clarke was made Chancellor, because of his refusal to rule out a return to the exchange rate mechanism (ERM) and it would go wider than the rows over Maastricht, extending into the Cabinet. John MacGregor, Secretary of State for Transport, is seen as a safe, non-controversial choice, although those around him recognise there is a radical cutting edge behind the banker's exterior.

Michael Howard, Secretary of State for the Environment, who greeted Britain's exit from the ERM as 'an opportunity', is the champion of the right and the 'stop Ken' candidate for the Chancellorship.

Some MPs believe Mr Major may choose to put Sir Norman Fowler, the party chairman and his closest ally, into No 11. Although not a heavyweight, Sir Norman gained a reputation for 'a safe pair of hands' before resigning from Margaret Thatcher's Cabinet to 'spend more time with my family' and has miraculously escaped blame for the county council and by-election disasters.

Malcolm Rifkind, Secretary of State for Defence, is being tipped to replace Sir Norman at Central Office. Others see in Mr Rifkind a future Foreign Secretary - and the right believes he is the best candidate to stop Michael Heseltine getting the job next year, when Douglas Hurd bows out.

The President of the Board of Trade is said by friends to have 'bounced back' from the debacle over the pit closure programme. But his enemies - and there are many - want him to 'stew in his own juice' at the Department of Trade and Industry until he eventually bows out of government.

Ken Clarke's matey confidence was much in evidence this week. On Monday night, he found time to have a pint of Federated Ale in one of his favourite haunts, the Strangers' Bar of the Commons, known as the Kremlin because of the number of Labour MPs who frequent it. 'It's not every Home Secretary who would have a pint with Labour MPs,' said one of his friends. Mr Clarke's 'man- of-the-people' appeal, and commonsense approach to politics, once made him the hot tip among Tory MPs, tired of ideological revolution, to eventually replace Mrs Thatcher. But his star has waned with Tory MPs looking for a return to conviction politics after Mr Major. That is why many favour Mr Portillo, who is in charge of cutting public spending. He won praise last year for his handling of the spending round and has ordered four departments - health, social security, education, and the Home Office - to conduct long-term reviews, 'thinking the unthinkable'.

He could inherit the task he set himself, if he is moved to Education to replace John Patten. Mr Patten's tactical retreat on testing has, say Tory MPs, 'done just enough to rescue him'.

But the episode has shown Mr Patten to be, in the view of some, too vain, too proud and too clever for his own good. The MPs expect Mr Patten to be moved sideways to National Heritage, where he would take charge of the arts and the review of the press and privacy.

Mrs Bottomley, Secretary of State for Health, is likely to be a victim of her own success. 'She has taken health off the boil. We want to keep it that way,' said a leading member of the Tory backbench health committee. Mr Major will have to do a fine balancing act with the new candidates for Cabinet seats from the right and left of the party. John Redwood, the local government minister and a dry Thatcherite former No 10 adviser, tipped to replace Mr Portillo as Chief Secretary, could be balanced by Stephen Dorrell, the Financial Secretary and a dampish but bright, hard-hitting presenter of government policy, able to cope with Newsnight interviews by Jeremy Paxman. Other Cabinet contenders include Brian Mawhinney, Mrs Bottomley's tough No 2 at Health; Roger Freeman, the transport minister; and Sir George Young, the housing minister.

Those tipped for demotion include: Tony Newton, Leader of the House; Peter Brooke, Secretary of State for National Heritage; and possibly William Waldegrave, responsible for the Citizen's Charter and science, although his friends point out that he had breakfast with Mr Major on Monday, so all is not lost.

One senior Cabinet colleague said: 'The Prime Minister only has one big weapon these days, and that is the power to carry out the reshuffle. Any wise Prime Minister doesn't throw that away by telling his colleagues what he intends to do - and John is keeping his cards very close to his chest. None of us is being consulted, and none of us know what he is planning.'

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