Osborne in more trouble for Davis jibes to Mandy

The shadow chancellor risked a backlash from the Right of the Tory party as senior colleagues warned that he had shown poor judgement in his dealings with the Business Secretary and financier Nat Rothschild.

Senior figures have told Mr Osborne personally that he had been "ill advised" to brief against Lord Mandelson on his return from the Rothschild villa in Corfu this summer.

The Evening Standard has been told that Mr Osborne attacked Mr Davis, claiming that he had failed to fully back the leadership's modernisation of the Tory party.

Mr Davis is known to have infuriated David Cameron when he suddenly quit the shadow Cabinet earlier this year but the former shadow Home Secretary has always insisted that he has been very supportive of Mr Cameron.

There were also further indications that the temporary truce over the Corfu affair is at breaking point.

Allies of Mr Rothschild indicated that Oleg Deripaska, the Russian billionaire at the centre of a row over donations, would consider signing an affidavit backing the financier's version of events.

It was claimed that the affidavit would be drafted unless Mr Osborne and the Conservative Party halted their attempts to "rubbish" Mr Rothschild. A spokesman for Mr Deripaska was unable to confirm or deny the claim.

Earlier today, it appeared that Mr Rothschild did not want to prolong his dispute with Mr Osborne. But a source close to him warned: "If anything is put out that in any way contradicts what he has said, Nat will come back. This is not a white flag of surrender."

After details of private conversations between Lord Mandelson and Mr Osborne were first leaked two weeks ago, the Business Secretary warned that if his own private conversation had been made public then similar remarks by the shadow chancellor risked being released too.

Tory MPs are now speculating that Mr Osborne could be replaced by William Hague and shifted instead on to full-time general election co-ordination if the row gets much worse.

The shadow chancellor's manner has irritated some colleagues, while many on the Right want him to be bolder about cutting taxes.

Mr Osborne also remains under threat from a possible complaint to the Parliamentary Standards Commissioner about his decision not to register a free family holiday at the Rothschild estate.