HHCL is one of five candidates picked by a committee of senior Tories, led by Michael Ancram, the party chairman. A decision is expected early next year. Michael Ashcroft, the Tory treasurer who last week settled his legal dispute with The Times, has been told he must find up to £10 million to fund a national advertising campaign for the next election.

 Party sources believe that it was the need to concentrate on this which was one of the major factors in his decision to settle the libel dispute. The list is notable for the absence of M and C Saatchi, but one of its subsidiary firms, the Immediate Sales Company, is a candidate. 

During the last election campaign Lord Saatchi fell out with Sir Brian Mawhinney, the then Tory chairman, who said he would advise any successor against using the company again. However, the main reason Lord Saatchi is not bidding himself is because he is now a Treasury spokesman for the party and fears accusations of conflict of interest or favouritism.

 Another Tory ad-man of the past is behind the HHCL bid. Lord Bell, who as Sir Tim Bell was Lady Thatcher's favourite PR man, heads HHCL'S parent company, Chime. The third contender is Yellow M, which ran the party's advertising in the Scottish elections. These included controversial attacks on Labour including B-LIAR posters.

 The other candidates are Banks Hoggins O'Shea, which devised the advertising for Sir James Goldsmith's Referendum Party, and Hype, run by Michael Isaacs, the brother-in-law of Mr Hague's adviser, Danny Finkelstein.