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The move has astonished modernisers within the Conservative Party because Ian Laws was suspended after demanding publicly the removal of Ashley Crossley as candidate in Falmouth & Camborne before the last general election.
Mr Laws is now one of the favourites to succeed Mr Crossley as the Tory candidate in the highly marginal seat, which the Liberal Democrats captured from Labour last year.
Mr Crossley, 32, a City barrister, survived a confidence vote within the Tory association in a row over his suitability, which was clouded by allegations of homophobia.
The row threatened to derail the drive by Michael Howard, the Conservative leader at the time, to create a party more inclusive to women, gays and ethnic minorities.
Senior Tory MPs such as Ann Widdecombe, a friend of Mr Crossley, were mobilised to try to shore up support for him within the Conservative association. Mr Howard ordered Conservative Central Office officials to monitor the confidence debate. But the row split the association and David Mudd, a former Tory MP, stood as an independent to try to spoil Mr Crossley’s chances.
The Conservatives have now lifted the suspension on Mr Laws, who has failed to make David Cameron’s A-list of candidates, which he set up to give women, gays and candidates from the ethnic minorities a better chance of being selected for winnable seats.
Local associations still retain autonomy over the MP candidate selection process.
Mr Laws, who owns three supermarkets in Cornwall, denied that he was opposed to Mr Crossley because he was homosexual. “I was not involved directly in his difficulties,” he said. “In the 18 months he was candidate I think I spoke to him only three times.
“I was surprised to be suspended from the party because I have been a Conservative all my life. The matter was resolved, my suspension was lifted, and it is true that I am now on the candidates list.”
Selection for the Cornish seat is due to begin next month and Mr Laws declined to rule himself out. “As of now, I have not yet applied for any seat, but I am well known in business around here and I think we can win back the seat.”
Asked if he thought Mr Crossley should try to secure the nomination again, he said: “No comment.” Asked if he had voted for Mr Crossley at the general election, he said: “Voting is a private matter.”
Mr Laws said that Mr Crossley survived because of “the manipulation of Conservative Central Office” who had agents “present in large numbers to stage-manage proceedings”.
Mr Crossley, 34, who hopes to stand for Parliament at the next election, was surprised to be told that Mr Laws was now on the candidates list. He declined to comment.

Sam Coates's blog about Westminster, politics and spin
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