Budget 1999: Red Gordon and the Iron Chancellor sit happily together

"REDISTRIBUTION BY stealth" is a phrase that entered the Treasury lexicon in the run-up to the Budget. Although the slogan was not intended for public use, it will enter the political bloodstream.

Such talk does not go down well in Tony Blair's inner circle, which would prefer that Gordon Brown stuck to his City image as the "Iron Chancellor" rather than playing his role as "Red Gordon" in front of the Labour Party gallery.

Yesterday's Mr Brown sought to play both parts at once but Mr Blair was happy enough. He calculated that next year's surprise 1p off the basic rate of tax, plus the 10p bottom rate, which starts next month, would be the best antidote to the Tory attack on Labour's "stealth taxes".

William Hague is convinced the voters will rumble the Chancellor once the initial gloss of yesterday's package wears off. But Mr Brown and Mr Blair believe their trump is that the pain they inflict on the well-off will be alleviated by falling interest rates, which have saved the homeowner pounds 900 a year on average mortgage payments.

Mr Blair paid a generous tribute when the Cabinet was given a preview of the Budget, describing it as "radical and imaginative". Indeed, Mr Blair believes Mr Brown has not got full credit for his stewardship of the economy. Mr Blair thinks the Chancellor has laid such firm foundations that it will be be difficult for the Tories to dent Labour's reputation for economic competence before the next general election.

The ecstatic reception from Labour MPs last night will also have cheered Mr Brown.

"Gordon wants to get the credit with the Labour Party because he is still desperate to be leader," one minister close to Mr Blair said.

Mr Brown is probably the most powerful Chancellor we have had for a long time, yet even his friends admit he can seem remarkably insecure.

His enemies attribute this to his thwarted ambition in 1994, when John Smith died and Mr Blair, the junior partner in the Brown-Blair axis, inherited the crown.

The Chancellor is stubborn. He does not like to change course, or admit he has been proved wrong. He ploughed on with his working families tax credit - even when alarm bells rang in 10 Downing Street about the cost.

Mr Brown saw no need for last month's high-profile statement by Mr Blair unveiling the national changeover plan to prepare Britain for the single currency. The two men have reversed roles on the euro; Mr Brown used to be more gung-ho, and Mr Blair more cautious. "He just wants to get on with running the economy now; the euro is a bit of a distraction," said one Labour ally.

Mr Brown has had an unhappy few months. The death of his father, which hit him hard, was followed quickly over Christmas by the resignation of two of his inner circle, the Treasury minister Geoffrey Robinson and Charlie Whelan, his press secretary, in the crisis which also claimed the scalp of Peter Mandelson, a friend turned foe of Mr Brown.

But allies insist the Chancellor has recovered from the setbacks, and that his girlfriend, Sarah Macauley, has been a "rock" during the troubled times. "He is relaxed and enjoying life again," said one ally on the Labour back benches.

Despite Mr Blair's praise, the tension between their camps remain barely beneath the surface. One Blairite said: "It was worth losing Peter Mandelson in order to get rid of Charlie Whelan, because Peter will come back and Charlie won't."

The Blairites sometimes wonder whether the Chancellor has a fatal flaw stemming from his haunting fear that he will miss out on becoming prime minister. Mr Brown's supporters believe yesterday's clever package will enhance his prospects of winning the big prize. And yet Mr Blair no longer believes it is inevitable that Mr Brown will be the man who succeeds him.

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