This Was a Political Car Crash

Talk about a cliff-hanger: the wooing of Alan Milburn, and his on-off-on-off decision about whether to return to Tony Blair's cabinet to confront the ambitions of Gordon Brown, has been an extraordinary soap-operatic farce, even by the wild standards of the New Labour years. He didn't ask to come back. Blair's people more or less announced that he would be coming, anyway. He thought he'd got firm promises from Blair about his powers to oversee the third-term programme. At one stage those promises melted away. Milburn insisted on reassuarance befor accepting the job.

By last night, almost everyone involved was angry and confused. Blairites were in despair about the prime minister's apparent unwillingness to confront Brown. Brownites were appalled by the leaking of the plan to use Milburn to humiliate the chancellor. And decent Labour people outside both camps were wringing their hands at the dreadful damage the government was managing to inflict on itself, just days into the new political season.

The stakes this week have been very high. Either the prime minister got his way and reshaped the cabinet, making it clear that he was in charge, taking Labour in a more market-radical (or rightwing) direction, and for a long time. Or else he caved in, the Blairites started to crumble, and the direction changed.

At first sight, it all seems ludicrously finickity - Milburn and his family aside, who cares about the exact terms of reference for his new cabinet job? But this is no more the real cause of conflict than the assassin's bullet winging towards the Archduke in Sarajevo. Though the crisis may seem to have come out of a clear blue, late-summer sky, it has been building for a long time. Blair's people accuse the Brownites, who are fed up waiting for Blair's departure, of trying to stage a putsch after the local elections, and failing. Historians can pick over all that, though I saw no credible signs of any plot. What matters more is that each side was terminally mistrustful of the other before everyone returned to Westminster this month.

Far from a Brownite putsch, the real story of the summer is of a second New Labour putsch. First came the bid to put Peter Mandelson in place of Andrew Smith, as secretary of state for work and pensions - hence the unpleasant undermining of Smith, which continued over the summer and culminated in his resignation earlier this week. Mandelson was to have pushed ahead with radical reform of the welfare system - but his return was blocked after at least five cabinet members put their foot down. Europe was his consolation prize.

Beaten on that one, Blair determined to bring back Alan Milburn as election mastermind - all part of a strategy, being urged by some Blairites, of going in for the kill. Rub Gordon's nose in it by putting in Milburn, an utterly self-confident Blairite whose loathing of the chancellor is the worst kept secret in British politics. Then, for an encore, drive through a thoroughly Blairite, modernising manifesto and make it clear you're staying on until Brown is grey, or even white. And when he does move on, well, there's Blair Mark Two, in the form of Alan Milburn, groomed for the succession.

Where, you might wonder, is the danger for Tony Blair in any of that? He seems stronger than ever. The early summer elections were very bad but not completely disastrous. There is no Tory revival. Blair may no longer be liked by large numbers of ordinary Labour activists; but the man's on a roll.

Yet the danger is clear enough. For a start, leaders can't anoint their own successors. Thatcher tried and failed - remember John Moore, John Patten, and the other leaders in waiting who disappeared without trace? The fact is that the next Labour leader will be chosen by the Labour party, not Tony Blair. And at present, Alan Milburn, with his enthusiasm for the market, is not top of the pops among Labour's rank and file.

But this is much more than a gamble about the succession. This public declaration of war - and make no mistake, to put Alan Milburn in charge of the manifesto is seen by the Brownites as a declaration of war - risks destabilising the entire party in the run up to the election campaign. The idea that Brown would go along with it quietly is, according to someone close to him, "ridiculous". It's not just Brown. John Prescott, who despairs of the Brown-Blair circus, and Ian McCartney have been in there battling to retain their influence too. In the weeks to come, other ministers, MPs, party members and trade unionists will join the fray.

For although Labour manifestos are put together by a host of different sources - from No 10 thinktanks to the national policy forum, the key question is who wields the pen. He or she will set the tone and direction of the next Labour administration.

Milburn, according to those who have been trying to persuade him back, (John Reid, Tessa Jowell and Stephen Byers), is just the man to come up with a radical manifesto which addresses the opportunity society which New Labour wants. But his opponents claim that "radical" is simply a code word for privatisation, and suggest that Milburn's instincts have little in common with Labour values.

The only certainty, now that Milburn has accepted the job, is that stories of personality splits and policy differences are not going to go away. Up until now, New Labour has worked simply because it has been a sprawling and in many ways unlikely coalition. To try to turn it into a narrower clique, with only true disciples of the Dear Leader in the ascendancy will bust that coalition apart.

How can it help Labour, at this point in the electoral cycle, for the party to narrow itself and the leadership to alienate all those decent, mainstream, Labour people who feel queasy about our linking up with hardline US Republicans, or who don't want to see private healthcare companies marching into the core of the NHS?

Blair hasn't thrived as a political leader in spite of the compromises he's made with Labour's natural supporters. He's survived because of those compromises. John Prescott isn't simply a grumpy old household god who has to be appeased and patronised for PR reasons. He's a Real Labour man who's fought his way up from the bottom. Gordon Brown isn't an angry egomaniac. He's the brightest moderniser around, who can take credit for many of the greatest successes this government has had.

Now, it seems, we have the worst of all worlds. Blair, in trying to assert his authority, has only proved how dubious it is. Brown may not have dictated who he puts in his cabinet, but the agonisingly drawn-out process shows that Blair is not fully in control, either. And the debate about Labour's direction for the third term, which ought to be in its final stages, has hardly begun. This is not just another cabinet squabble. This is turning into a political car crash. The majority is bigger, but the spectacle reminds me now of John Major's Tories in their very worst moments. This level of factionalism is big enough to destroy a government.