Boris Johnson and his senior team thrashed out their differences in a five-hour meeting last night after the Chancellor said the government 'needs to do better'.

In his first intervention on the crisis, Rishi Sunak hinted at Cabinet divisions over the Prime Minister’s disastrous attempt to block the suspension of former minister Owen Paterson for breaking lobbying rules.

During a round of media interviews yesterday, Mr Sunak said: ‘Reflecting over recent events – I think for us as a Government, it’s fair to say that we need to do better than we did last week, and we know that.’ 

Meanwhile, the Cabinet meeting was ostensibly focusing on the Levelling Up agenda with ministers due to lay out how their department is contributing to the drive. 

Originally the team had planned an away-day at Chequers, but plans for this were dropped and they met at Downing Street instead.

Work and Pensions Secretary Therese Coffey arrived armed with an A3 map seemingly to help get her message across.

However, the political discussion is believed to have also addressed how to quell the rising tide of criticism about second jobs, conflicting interests and cronyism among MPs.

Health Secretary Sajid Javid, Housing Secretary Michael Gove and Chief Secretary to the Treasury Simon Clarke were among those seen departing Downing Street after gathering for crunch talks late into the night.

Allies of the Chancellor say he was dismayed by the decision last week to order Tory MPs to vote to tear up Parliament’s anti-sleaze laws in order to save Mr Paterson.

The Prime Minister won the vote after imposing a three-line whip. Mr Sunak was absent for the vote because he was at the Cop26 summit in Glasgow at the time.

But the plan was abandoned the following day in the face of a huge public outcry, prompting Mr Paterson to resign as an MP.

The episode has triggered a wave of sleaze allegations against the Conservatives and seen the outside interests of all MPs come under fresh scrutiny.

It has also resulted in a Tory slump in the polls, with Labour taking the lead for the first time in a year in several surveys.

Mr Sunak did not comment directly on the cases of either Mr Paterson or Sir Geoffrey Cox, the former attorney general who has racked up more than £5.5million in outside earnings.

He said: ‘People will have different motivations for doing what they do, the pay is set by an independent body, that’s absolutely right.

‘And with regard to second jobs, there’s an independent process that we have that’s set by Parliament that governs all of those things. And it’s absolutely right that that process is followed to the letter.’

Cabinet Office minister Steve Barclay expressed ‘regret’ this week for the ‘mistake’ made in attempting to force through a change in the rules on the back of Mr Paterson’s case.

As condemnation grew, the PM moved to remind MPs that they should ‘devote yourself primarily and above all to your constituents’. But he proposed no new measures to restore public confidence. And he has so far refused to offer any apology for opening up a damaging line of attack for Labour.

An ally of Mr Sunak said he viewed last week’s events as ‘a mistake’ and believed ‘that point needs to be made by someone in the Cabinet’.

No 10 sources played down suggestions of Cabinet divisions, saying: ‘The PM has said that it is vital MPs focus on their constituents and obey the rules. He thinks those who break the rules should be punished. We are all agreed on this.’

But another Cabinet source said the PM had ‘f***ed up’ and that the attempt to block the suspension of Mr Paterson looked ‘totally crooked’. Business minister Paul Scully hinted at anger over the damage caused by the sleaze row yesterday.

Questioned about the conduct of Sir Geoffrey, he told Sky News: ‘I’m not going to defend Geoffrey. I’m not going to say anything.’

Backbench Tories also voiced anger at the events of the last week, which have left many of them facing a backlash from constituents.

One former minister told the Daily Mail: ‘The last week has been a hideous nightmare – it is dirtying us all. When we made him PM we knew there would be periods of chaos but that was a price worth paying to defeat Corbyn and get Brexit done.

‘Those two tasks are completed now and his situation is more perilous than people think.’