While Tony Blair holidays in the Seychelles, they have joined forces to promote "interventionism" in government and fill the vacuum left by the Secretary of State for Trade and Industry.
In an interview with The Independent, Mr Prescott revealed publicly for the first time that he and Mr Brown were working closely to shift the focus of the Government. Mr Prescott said the controversy and media speculation surrounding the Mandelson affair had led them to realise Labour should concentrate more on "substance" than rhetoric.
In the interview, understood to have been sanctioned by the Chancellor, Mr Prescott challenges Mr Mandelson's New Labour commitment to improve productivity through the free market: "We have decided that public expenditure is there to uphold the economy in the traditional Keynesian way."
The Deputy Prime Minister heaps praise on Geoffrey Robinson, the former paymaster-general, for his help in developing radical public-private sector partnerships and schemes to raise money for public transport from road pricing.
Coming 24 hours after the cabinet "enforcer", Jack Cunningham, told ministers to stop the feuding that was damaging the Government, Mr Prescott's words represent a reassertion of his authority as Deputy Prime Minister. It is known that he and Mr Brown are among several Cabinet ministers, including Jack Straw, the Home Secretary, and David Blunkett, the Secretary of State for Education, alarmed by Mr Blair's forging of closer links with the Liberal Democrats and his desire to realign the centre-left through electoral reform.
News of the new Cabinet axis was greeted with glee by the Tories, who said it proved Mr Blair had lost control of his ministers. John Redwood, shadow trade and industry secretary, said the Prescott-Brown partnership's stress on interventionism proved that the Government had not lost its Old Labour instincts to interfere with business.
"The civil war is evidently hotting up. They are now introducing some ideology into what so far has just been intense personal loathing between the Chancellor and the Prime Minister. Clearly, we are seeing Old Labour trying to exploit the New Labour weakness following the resignation of Peter Mandelson. It's quite extraordinary." A senior party source said that the alliance was an attempt by Mr Prescott to help Mr Brown at a time when he was under intense pressure to fire his spin-doctor, Charlie Whelan, following the Mandelson resignation.
"This is certainly significant. Gordon and John are using the opportunity of Peter's departure to say that not everything he did was on target and we need to shift things. A lot of the party would agree," the source said. But a senior Liberal Democrat said the alliance was a distraction from the Government's reforming agenda. "Tony should come back from holiday with his sun-tan and bang all their heads together."
Andrew Mackinlay, MP for Thurrock and a member of the Parliamentary Labour Party's executive, was delighted by news of the alliance. "Lots of backbenchers will be extremely pleased at this. We were sure that the traditional Labour values would break out once more after a period of suppression."
He hoped the move would herald a wider fightback against some of the more aggressive New Labour ideas proposed by Millbank apparatchiks.
One such idea was abolition of activist-dominated general committee meetings of local constituency parties. "I hope this means we can now drop such ideas and bring back the Labour stalwarts that we were losing in droves."
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