New Labour's All Stars XI

BSkyB's takeover of Manchester United shed some revealing light on the network of connections at the heart of Government

AS SOON as the news broke last weekend that Rupert Murdoch was trying to buy Manchester United, Tony Blair's press secretary, Alastair Campbell, got straight on to the phone. His first call was to Peter Mandelson, the Trade and Industry Secretary, to discuss what the Government should do. His second was to Tim Allan, director of corporate communications at BSkyB and his former deputy at Downing Street. Four months after he saw his protege off with a champagne reception at Number 10, Campbell needed to know if the reports were true before he could decide whether to put ministers on television to respond. Allan confirmed nothing, but he was unable to knock the story down. Sports minister Tony Banks was sent, his Downing Street-agreed script in hand, to appear on the BBC.

Allan, one of the bright young things cultivated by Tony Blair, was a convenient contact for the press secretary to have. But he could also have plucked the number of Alex Ferguson, manager of Manchester United and another friend, from his bulging address book. The two men regularly go to football matches together and speak so often that rumours began circulating that Campbell had commissioned Ferguson to coach the Prime Minister in "life skills". Then on Wednesday, another hot connection popped up. Mr Blair's spokesman found out that, by coincidence, he would be sitting next to Elisabeth Murdoch at a lunch hosted by Rosie Boycott, editor of the Daily Express. He realised that even chatting about the weather to the media mogul's daughter - now the managing director of Sky Networks, which decides BSkyB's programme content - would be interpreted as an attempt to exert influence. He cancelled the engagement.

The Government has begun to learn that its wide network of friends can be dangerous. On the terraces, Murdoch's attempt to buy Manchester United was about nothing less than the future of football - but in Whitehall it was about "cronyism". Like the "lobbygate" affair, the row, more than anything else, laid bare the inter-connections within the New Labour new establishment. The question in everybody's mind was, did the members of the famous "inner circle" identified by lobbyist Derek Draper pass on information to one another that they should not have done? The Government knew it had to make sure it was above reproach. Mandelson immediately handed over responsibility for adjudicating on the bid to the Office of Fair Trading to avoid accusations that his friendship with Elisabeth Murdoch would create a conflict of interest. On a more trivial level, Tim Allan pulled out of a cricket match in which he was due to captain a team of Labour advisers against their Tory contemporaries in case it looked like he was trying to pull strings.

Rupert Murdoch's interest in Manchester United was first hinted at three years ago, during the famous Hayman Islands conference at which Tony Blair was his guest. There, his senior executives were openly praising the football club as an example of a company which had successfully "rebranded" to keep up with the modern world. But discussions about the deal began in earnest in June this year. The driving force was Mark Booth, BSkyB's 42- year-old chief executive, who used to run MTV's European wing. He held a series of meetings at his London headquarters with the chief executive of Manchester United, Martin Edwards. The two men established the outline of a proposal without raising suspicions; they met regularly anyway to discuss the Premiership, to which BSkyB owns the broadcasting rights. According to those involved with the deal Rupert and Elisabeth Murdoch were not informed until negotiations were under way. Three weeks ago the meetings became more urgent as the details began to be thrashed out. A week ago, lawyers and bankers were working through the night in a City office surviving on Chinese takeaways to finalise the arrangements. When the story broke, their frustration was that they could not "rebut" the negative publicity which had been generated because stock market rules forbad them to discuss their intentions. By 6am on Tuesday, when the pounds 623 million agreement was finalised, insiders say "nobody felt like drinking champagne".

The deal was slick and efficient. But crucial to the events which unfolded over the week was the "new establishment" - the tightly bound group of friends and allies who now run the country. The network includes many people who formed close friendships working for Labour in opposition and have now gone on to other jobs. It also contains those powerful figures who know they have to keep in with the Government, whatever its political persuasion. But ministers have begun to realise that mixing in such glamorous circles is a double-edged sword.

Focus groups have found that people can find almost nothing wrong with Tony Blair - except for his association with the rich and successful. The new establishment is the one thing which undermines their image of the Prime Minister as an "ordinary bloke", someone much like them. The research shows that for the public, Blair has an extraordinary chameleon quality. When people are asked to imagine themselves meeting him, those in the CD social group describe this Oxford-educated barrister coming into their local pub and ordering a pint; bizarrely, the ABs can just as clearly picture themselves sharing a bottle of Chardonnay with him in the local wine bar. However, this astonishing ability to be all things to all people is undermined by the parties for pop stars at Downing Street. The Tories coined the phrase "Tony's cronies" because the focus groups showed that his links with the powerful undermined the Prime Minister's popularity.

At the centre of the circle is Blair's relationship with Murdoch. This was sealed on the Hayman Islands trip at which the media mogul decided the Labour leader was going to win the election. The two men are not exactly friends - they mistrust one another and their last meeting was a guarded conversation at Sir David English's funeral in June. Labour is convinced it has to keep the Sun on side to win successive terms. Earlier this year Blair intervened with the Italian prime minister, Romano Prodi, on behalf of Murdoch about a television deal. At the same time, Murdoch is unwilling to alienate the Government. BSkyB has given money to the Millennium Dome and is sponsoring an event at the Labour Party conference.

The connection between Peter Mandelson and Elisabeth Murdoch is closer. They have had a gossipy relationship since they bonded at a Fourth of July party she hosted at her mansion in Kingston-upon-Thames two years ago. He was wearing cowboy boots Tony Blair had been given by Bill Clinton at a G7 summit in Denver. She finds him charming and funny - but recently has begun to rely on him emotionally, reputedly crying on his shoulder when her marriage broke up and she started seeing his friend Matthew Freud, the London PR. They were together in August at a party in Kent hosted by the TV mogul and Labour peer, Waheed - now Lord - Alli.

Gavyn Davies, a director of Goldman Sachs, the bankers for the deal, is another member of the golden gang. He is a friend of Gordon Brown, and his wife, Sue Nye, is the Chancellor's powerful diary secretary. Brown was photographed at their child's birthday party shortly before announcing the Budget.

Greg Dyke, chief executive of Pearson Television Ltd and a Labour Party donor, was also involved in the deal as the only Manchester United director who opposed it. Football, a suitably New Labour "people's game" plays a central role in this top team. The Prime Minister "came out" as a Newcastle United fan in the run-up to the general election as part of the drive to promote himself as an ordinary guy. The Chancellor is a lifelong fan. He ignored the Downing Street moratorium on attending the World Cup to watch Scotland versus Brazil in the opening match. He often gathers with Geoffrey Robinson, Charlie Whelan, his press secretary, and Ed Balls, his economic adviser, to watch matches over a curry in the Paymaster General's penthouse at the Grosvenor House Hotel.

A junior league is already on the field, congregating for champagne at the Soho House club and burgers at Joe Allen's - and to play football on Highbury Fields in Islington.

Tim Allan, the scooter-driving BSkyB communications director, who is nicknamed Miles because he looks like the character in This Life, has become the most high-profile. But the others, most in their late twenties and all disciples of Blairism, are no less influential. Allan's former flatmate and schoolfriend James Purnell, a member of the policy unit at Number 10, is in the circle, as is Benjamin "Oofy" Wegg-Prosser, special adviser to Peter Mandelson. Liz Lloyd, another policy adviser who was at school with Purnell and Allan, also plays, and is cited as evidence that this is not exclusively a lads' game. David Milliband, head of the Downing Street policy unit, is another member of the football gang. Derek Draper, the former lobbyist, has been ostracised by some - but remains in the circle despite embarrassing its members.

In the old days, these people would have been schooled at Eton and gone into the City - in the modern age, they went to comprehensives and decided to work for the Labour Party. Their friendships were forged in the months before the general election and the euphoric days after it. You cannot blame them for that. The only trouble is that in opposition, the network was nothing but fun - but in government it has begun to matter just a bit too much.

The magnet and the magnetism, Sport, pages 6-7

Captions:

Establishment united: Back row, left to right, ALASTAIR CAMPBELL, tough- tackling PR to Tony Blair, likes to talk football with ALEX FERGUSON, manager of Manchester United, noted for turning up at the Labour Party conference; GORDON BROWN, the Chancellor of the Exchequer, who was not going to let prime ministerial disapproval stop him from attending Brazil v Scotland in the World Cup; GAVYN DAVIES, economist buddy of Brown's and partner at Goldman Sachs, the merchant bank that brokered the Man Utd-BSkyB deal; SUE NYE, wife of Gavyn Davies, and Brown's diary secretary. It was Nye and Davies's children with whom Brown posed for photographs before this year's Budget; GREG DYKE, TV mogul, Labour Party donor, director of Manchester United - but opposed the BSkyB deal and said he will give his profits to charity.

Front row, left to right, TIM ALLAN, former deputy to Mandelson, now director of Corporate Communications at BSkyB; ELISABETH MURDOCH, daughter of Rupert and managing director of Sky Networks, which decides the programmes to be shown on BSkyB, Manchester United's new owners; RUPERT MURDOCH, the biggest player of the lot, his path to media and football pre-eminence has been smoothed by TONY BLAIR, the Prime Minister, whose finest footballing moment came when he succeeded in by playing keepy-uppy with Kevin Keegan; PETER MANDELSON, Trade and Industry Secretary, with whom, ultimately, the decision rests whether the United-BSkyB deal should go ahead.

PHOTOMONTAGE BY JONATHON ANSTEE