MICHAEL HOWARD’S election strategy was condemned last night by one of the party’s major benefactors as Tim Yeo, the Shadow Environment Minister, quit his post to fight for radical change in Tory policy.

Michael Spencer, who is thought to be worth £360 million, criticised the strategy of focusing on “immigration and asylum” at the expense of taxation and the health service.

The criticism from Mr Spencer, the chief executive of Icap, the world’s biggest inter-dealer broker, is all the more telling as he paid the £250,000-plus to employ Lynton Crosby, the Australian polling guru who masterminded the campaign.

Mr Spencer told The Times that he drew strength from the party’s improved parliamentary position, but said: “While there are positive signs within the election result, I feel the outcome was a negative vote against Blair rather than a positive vote for the Conservatives.

“The Conservative campaign was too narrowly fought and focused too much on immigration. We put forward no clear strategy on the reform of the health service. We were too narrow on vision. It was a mistake for Michael Howard to describe Tony Blair as a liar as it made him and the Conservatives look unstatesmanlike.

“Lynton Crosby has many strengths but he was allowed to narrow down the political debate more than he should have done. It was for others to say, ‘We are not the same as Australia’. ”

The criticism came as Mr Yeo called for a shake-up in future Tory policy and strategy. Mr Yeo, who was among those ready to challenge for the leadership 18 months ago before Mr Howard became the consensus candidate, told The Times that the party had been thrown a lifeline by the results of the general election in which it had made a modest advance.

But to be ready to win power again it had to make more far-reaching changes than politicians appeared to be ready to talk about so far.

Mr Yeo declined to say whether he would stand for the leadership. But he is one of several potential candidates on the centre left who are to discuss tactics this week to decide who would be the best contender to see off a challenge from David Davis, the Shadow Home Secretary, who seems certain to emerge as the favourite of the centre right.

Mr Yeo is believed to be unhappy at the meagre prominence given to environemental issues by the party leadership in the election campaign. But he is more interested in opening up a debate about the future of the party.

Nicholas Soames, the Shadow Defence Secretary, was also reported last night to about to tell Mr Howard that he wanted to leave the Shadow Cabinet.

Lord Saatchi, the joint party chairman, began a thinly veiled attack yesterday on the so-called Notting Hill set of young Tories who were key advisers on the campaign. They are led by David Cameron, 39, the Old Etonian MP for Witney and a frontrunner to succeed Mr Howard, and Rachel Whetstone, who ran Mr Howard’s private office and is Shadow Cabinet member in charge of policy co-ordination.

Lord Saatchi, in a newspaper article, said that the strategy failed to portray Mr Howard as the man of passionate purpose which he was, and lacked vision. He said: “We did not raise the horizons of the British people and tell them with sufficient optimism, excitement and passion what ‘should be’. ”

A senior Shadow Cabinet source said: “Maurice is blaming the Notting Hill set. It was the Notting Hill set who kept Shadow Cabinet members off the airwaves.”

The Times has learnt that several benefactors lent the party millions of pounds in the run-up to the election confident that Mr Howard would remain leader for at least two or three years.

They include Johan Eliasch, a deputy treasurer of the Tory party, who lent £2 million through his companies and associates. Mr Eliasch, 42, a Swedish businessman who is worth about £340 million from buying and selling sports companies, is disappointed by Mr Howard’s decision.

When John Major resigned as Tory leader, after Labour’s first election landslide in 1997, the party came close to insolvency. The personal financial intervention of Lord Ashcroft, the party treasurer at the time, helped to avoid insolvency. Lord Ashcroft is owed £1.5 million by the Tories.

A senior party source said: “All the big donors who have handed over money in the last 12 months are appalled that Michael is going. The six-month hiatus until the new leader is chosen will be crippling financially.”

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