Mr Blair has often promised to make "hard choices" on welfare reform. Last night he was contemplating a stark choice between a public climbdown and a Cabinet row.
A powerful faction in the Cabinet, including John Prescott, Robin Cook, David Blunkett, Frank Dobson and Clare Short, are thought to be ready to take on the Prime Minister.
Indications of the seriousness of the opposition to aspects of Mr Blair's determination to cut a series of disability benefits came in a leaked memo to the Chancellor Gordon Brown, from David Blunkett, Secretary of State for Education and Employment Secretary. The memo, dated 9 December, the eve of the rebellion by 47 Labour MPs on abolition of the lone parent benefit, said the political flashpoint could come over the proposed abolition of industrial injuries benefit for existing claimants. That would be politically unacceptable and could provoke a sizeable rebellion, he suggested.
"Deep cuts in the totality of support for those disabled people who either cannot work or can find only very modestly paid work would make a mockery of our professions on a social exclusion and the construction of a more just society," he wrote in the letter, leaked to the Sunday Telegraph.
Mr Blunkett has recently been telling colleagues that he did not want the "dirty money" education could receive from cuts in disability benefits. But yesterday he denied there was a split and portrayed his memo as part of an ongoing debate.
John Prescott, the Deputy Prime Minister, was heard at Christmas parties using strong language when criticising the benefits cuts programme, although yesterday he denied reports that he had told Mr Blair that Harriet Harman, Secretary of State for Social Security, was "a liability" and had asked for her to be sacked.
Frank Dobson, the Secretary of State for Health, is also believed to have been critical in private. Robin Cook, the Foreign Secretary, and Clare Short, Secretary of State for International Development, are all thought to be unhappy although neither has spoken out yet.
There are also question marks over the strength of support offered by other ministers. A furious Alan Howarth, the former Tory minister, now an employment minister, was reported to have told ex-colleagues as he joined them in the lobby to vote for cuts in lone parents' benefits that it was too early in the Parliament to resign.
Last night the Tories released figures showing the Government could be defeated if the opposition parties voted together and 91 Labour MPs rebelled.
Mr Blunkett's opposition and that of several of his colleagues - a number of junior ministers are also believed to be unhappy - makes Mr Blair's latest strategy of taking personal charge a high-risk one.
The Prime Minister announced on Saturday that he would chair a special Cabinet committee including Ms Harman, Mr Brown and Mr Dobson to look at welfare reform. It emerged last night that Mr Blunkett would also be given a place.
Last night Mr Blair underlined his earlier stance on benefit reform "We will do it fairly and sensitively, but we are going to stand absolutely, resolutely firm on change because the welfare system isn't working and it needs reforming," he said.
If the project fails and the Government faces another rebellion or loses more ministers - Malcolm Chisholm has already resigned over lone parents - Mr Blair will take a personal blow which cannot be easily deflected.
Already some Cabinet members are grumbling about lack of consultation. Although there was a half-hour discussion on benefits last Thursday, most meetings are brief and ministers say they feel decisions are handed down rather than being taken jointly.
Even as the manoeuvring continued, it became clear that moves to cut disability benefit bills had already started. The 1.8 million people on Disability Living Allowance were being sent 33-page forms designed to see if they were entitled to their payments, according to the ITV programme Link. Although some had received extra money, many more had their benefits cut.
Lord Ashley, joint chairman of the parliamentary all-party disablement group, said the Government now had no choice but to think again after the leaking of the memo.
"It reveals proposals under consideration that are outrageous in their scope and depth. They will shock and disturb millions of disabled people," he said.
Blunkett's disquiet, page 6
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