THE WEEK IN POLITICS: D-day for Downing Street's feuding neighbours

THE FRAGILE truce between Tony Blair and Gordon Brown is about to be tested. The tempers of the Downing Street neighbours may have cooled a little in recent weeks after their explosive argument over the garden fence about a new book claiming that Mr Brown had told Mr Blair he would never trust him again.

But the relationship remains on a knife edge. The neighbours have only stopped insulting each other so the children don't hear. In the Blair camp's eyes, Mr Brown is no longer fully detached, merely semi-detached.

The crunch is coming because crucial decisions about the Labour manifesto must be taken soon. I expect there will be some interesting negotiations between David Miliband, the Cabinet Office minister playing a key role in drafting the manifesto for Mr Blair, and his brother Ed, one of the Chancellor's closest advisers.

Although Mr Blair and Mr Brown are no longer blood brothers, the likelihood is that they will avoid another spectacular falling out. But the fact that no one in Downing Street knows what will happen speaks volumes. "The next four weeks will be crucial," one Blair aide said nervously. "We will know whether they can do business again."

The stakes for the friends-turned-rivals are high. Mr Blair is compiling his third and final Labour manifesto, having said he will not fight a fourth election. He wants it to be fizzing with new policies so that a third term would not fizzle out. "This will be Tony's legacy," one adviser said. The problem is that the manifesto will, almost certainly, also be Gordon's inheritance.

The tricky issue of tax policy is not yet resolved. Mr Brown, like any Chancellor, does not want his hands tied. But he will probably recognise the need to repeat Labour's 1997 and 2001 pledges not to raise income tax rates to counter fears about "third-term tax rises". Polling presented to Thursday's Cabinet meeting suggested that many people on middle incomes feel "close to the edge" after Labour's backdoor tax increases.

In an ideal world, Mr Blair would like Mr Brown to scupper the Tories' pounds 4bn tax cut by reducing tax in his pre-election Budget. But we are not in an ideal world. The Chancellor will no doubt find a way of destabilising the Tories, perhaps by taking some people out of the top 40p tax rate. But a bigger tax cut might look irresponsible when he is perilously close to breaking his golden rule.

The manifesto compromise, I suspect, will be to promise no increase in income tax rates but to say nothing about national insurance, allowing some room for manoeuvre.

No one doubts that the differences between the Prime Minister and Chancellor have got personal. The question exercising Labour minds is whether they are now ideological. True, the divide is small in comparison with the personal and policy divisions inside the Labour governments of the 1960s and 1970s. There is no credible left-wing alternative; the choice is between different shades of New Labour.

However, the Prime Minister and Chancellor have diverged sharply over public services, the most problematic manifesto issue. Mr Blair wants to extend the role of the private sector in state-funded health and education to ensure more consumer choice for patients and parents. Mr Brown believes the NHS cannot be treated like a market place, pointing to the two-tier system in dentistry, and worries that Labour might destroy the public service ethos. He is happy to use the private sector to boost capacity, but does not want it to compete with public providers. His vision is very different to the Blairites', which is why they want to ram through more reforms in the hope he would not expend energy reversing them.

Their differences can be overstated. Sometimes the two camps exaggerate them. As one cabinet minister who tries to remain neutral told me: "Both sides are guilty of name-calling. Gordon is portrayed as an opponent of reform, which is rubbish. Tony is labelled right-wing, which is equally absurd."

Mr Brown plays to the Labour gallery by appearing to the left of the Prime Minister. Mr Blair seeks conflict with his own party to define himself to the voters. Hence the unnecessary legislation on foundation hospitals and John Reid's warning this week that he would allow hospitals to close if they fail to attract enough patients.

Mr Blair does not think the differences on public services are so great that a row is inevitable. "It depends on whether Gordon wants one," said one close ally. Mr Blair will listen to Mr Brown's concerns but will not give him a veto. His trump card is a big majority in his Cabinet, where Mr Brown has few acolytes.

The composition of the Cabinet after the election is again the subject of feverish speculation after reports that Mr Brown's opposition to moving to the Foreign Office is mellowing. There is even talk of a new deal under which Mr Blair would endorse Mr Brown as his successor if he agrees to become Foreign Secretary.

I am not sure the Chancellor would ever do another deal with the Prime Minister; he believes Mr Blair has let him down over the succession three times. As one suspicious ally of Mr Brown put it: "If Tony really wants Gordon to succeed him, why would he move him from the Treasury?"

My hunch is that the voters may decide Mr Brown's future. If Mr Blair wins big, he might feel emboldened enough to ask him to go to the Foreign Office. If he wins small, Mr Brown will be in a more powerful position, and the day when he calls all the shots will be fast approaching.

a.grice@independent.co.uk