Angry faces glower from Monty's Mirror: This front page is not typical of the Labour party's only tabloid ally, but Jason Nisse and Michael Leapman report big changes afoot

DAVID MONTGOMERY, the abrasive chief executive of Mirror Group Newspapers, has warned Lord Hollick, the millionaire Labour peer, that he must stop criticising him in public or leave the company's board.

The confrontation between the two men came during a week of despair for Mirror staff, with the resignation of the Daily Mirror's political editor and growing concern about whether the umbilical cord between the paper and the Labour Party was about to be broken.

On the editorial floor of the Mirror building in Holborn Circus, London, they have a new name for their paper. 'We call it the Daily Miracle,' says a reporter. 'With all this going on it's a miracle it's coming out at all.'

'All this' is a passionate argument about the future political direction of the paper that began last October and reached its climax last week when more than 170 Labour MPs signed a Commons motion expressing concern that it was drifting away from its traditional support of the party. The motion was provoked by the resignation of Alastair Campbell, a mild-mannered political editor with impeccable political connections.

Campbell is convinced he was ousted because of those connections - indeed he was told as much by Montgomery at a terminal interview last weekend. Even a half-page leading article on Wednesday, sporting the Labour red rose and headlined 'Together We Will Win', did not shake the doubters from their conviction that the old red rag is going blue at the edges.

To understand why, it is necessary to appreciate the complex web of personal relationships that have traditionally linked the Labour leadership with the only tabloid paper that consistently supports it. The political staff of the Mirror and its stablemates have been so enmeshed with the party that they have frequently straddled the barrier between politics and journalism.

Joe Haines was recruited as Harold Wilson's press secretary from the Sun when it was a sister paper of the Mirror in 1969 - then went back to the Mirror from Downing Street seven years later. Alf Richman was another Wilson apparatchik from the same stable. Ted Castle was a political adviser to both papers while his wife, Barbara, was in the Cabinet.

Campbell was very much in this tradition, as Neil Kinnock, the former Labour leader, revealed in a touching little tribute to the departed scribe in Thursday's Evening Standard. Kinnock told how he and his wife, Glenys, had arranged to go and see the Bolshoi Ballet with Campbell at the Albert Hall last weekend. It happened that this was also the night of the fatal Montgomery interview. Campbell arrived late and raging - not, presumably, just because he had missed the opening entrechats.

Montgomery does not approve of political correspondents who are on ballet-going terms with the people they are supposed to be writing about objectively. He told Campbell that all this had to change, that the paper's political coverage, while still essentially supportive of Labour, should be less blatantly partisan.

That was why, he said, he had hired David Seymour, an old colleague from Today who had earlier worked on the Mirror for 15 years, as an assistant editor to supervise the political coverage - the appointment that sparked Campbell's departure.

Campbell arranged to meet David Banks, the editor hired by Montgomery to get his revolution under way, to discuss his future. But Banks later cancelled the meeting and two days later Campbell left. The mini-drama is given added poignancy by Seymour's long-standing personal grievance against Kinnock, going back to Seymour's bitter divorce seven years ago from Hilary Coffman, a former aide in the Labour leader's office. Kinnock allowed Coffman to use his house in Wales to spend weekends with her lover.

Seymour himself is baffled by the fuss over his appointment. 'It seems to have set off the blue touch-paper,' he observes painedly.

While Montgomery's changes may seem scandalous to the MPs who signed the Commons motion, it is doubtful whether the paper's readers appreciate the nuances. More critical to the Mirror's future is whether Montgomery and Banks's changes, in which many apart from Campbell have lost their jobs, will halt its long circulation decline, said to be 13 per cent over the last two months.

Ironically this week's issue of the journalists' trade paper UK Press Gazette is advertising 'your big chance' for 'bright ambitious sub-editors' from the provinces.

Hollick supported November's boardroom putsch which placed Montgomery in charge of Mirror Group, but there are indications of a growing split between the peer and the former editor of Today and News of the World. Kinnock is known to be close to both Hollick and Campbell.

Hollick has referred all enquiries to Sir Robert Clark - the former adviser to Robert Maxwell - who is now chairman of MGN.

But it is understood he has been told by Montgomery that the place to voice any criticism of the editorial stance of the Mirror is in the boardroom. Montgomery's argument is that he has been placed in day-to-day charge of the newspaper group. If Hollick disagrees with the way Montgomery operates he should voice this in the boardroom and if the problems are too great he should vote to have Montgomery replaced. So far this has not occurred. Reports of an informal meeting of five directors at which two proposed that Montgomery be removed have not been confirmed.

The coup that brought Montgomery to power was engineered by Hambros, the merchant bankers where Hollick started his career and on whose board he sits. The putsch included a business plan in which Montgomery told the board there would have to be substantial job cuts and changes in working practices.

It was supported by the four banks which control 54 per cent of MGN's shares, and those banks have made it clear they want the Daily Mirror to continue supporting Labour.

Montgomery has never said he would change the Daily Mirror's political stance - quite the reverse. In a recent interview he said he wanted to 'modernise' the way the Mirror articulated its support for left-wing causes.

The banks are understood to be close to selling their stake in MGN, which is likely to be disposed of in a stock market placing with institutional investors.

(Photograph omitted)