Grassroots Tories were bewildered and angered yesterday by the row over George Osborne’s holiday encounters. Many felt that Mr Osborne was guilty of poor judgment and some asked whether the Shadow Chancellor could remain in his post.

John Sayers, a Conservative on Babergh council in Suffolk, said: “If he doesn’t come out with a satisfactory explanation, he should stand down. If he can’t satisfy the public and the media that he is squeaky-clean, he should stand down. He can’t blame the media for latching on to these things. Being on this boat was all a bit extravagant.”

Richard Cowling, a councillor in Aberdeenshire, said that Mr Osborne had become a liability whose good work had been undone by what had been alleged against him. “Truthful or not, it has already damaged him, probably to the extent where he will have to pull the plug – he’s not going to be able to disprove it,” he said. “It’s damage limitation . . . it’s up to Mr Cameron whether he shows him the door but it’s looking likely.”

Richard Bower, of Arun District Council, said that if Mr Osborne’s troubles proved damaging to the poll ratings, “he should fall on his sword”.

Elsewhere, Tory councillors were puzzling about how the Shadow Chancellor ended up on holiday with a controversial Labour figure and a Russian oligarch. “What is he doing with Man-delson?” asked Graham Payne, leader of West Wiltshire District Council.

Others felt that Nathaniel Rothschild’s letter to The Times bore the mark of the new Business Secretary taking revenge for Mr Osborne’s attempt to make political capital out of their Corfu dinner. John Mansfield, deputy leader of Welwyn Hatfield Borough Council, said it was “daft to associate with Mandelson”, adding: “I do think Osborne is an intelligent and able chap and am curious as to how he was suckered in to the whole affair.”

To Frank Keegan, leader of Maccles-field Borough Council, Oleg Deripaska was “someone that Mandelson and Osborne should have been steering clear of rather than going to visit his yacht”.

Some thought the row would blow over, but others were not prepared to wait long. David Lumgair, a councillor in Angus, said: “If this speculation is still going on by Friday, he should resign for the good of the Tory party.”

Some dismissed the allegations as a “storm in a teacup”, defending Mr Osborne against any claim of wrongdoing.

The Shadow Chancellor was “too important to lose” and the story a “petty Westminster affair”, irrelevant to people’s concerns, they said.

Michael Burton, of Peterborough City Council, said: “He’s made a statement as to what he has done, so has the party leader, and as far as I’m concerned I take that.”

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