Ms Mowlam called for the sale of Buckingham Palace and Windsor Castle to an organisation such as the National Trust, plus an issue of 'Palace Bonds' and donations, to finance a new showcase residence built by the country's leading architects and craftsmen.
The suggestion for a royal home 'representative of the age we live in and not a pastiche of the past' is in line with Ms Mowlam's reputation for straight talking - but there were Labour doubts yesterday over its political wisdom.
A prominent cheerleader in the run-up to Tony Blair's election as party leader, Ms Mowlam could be rewarded with a high-profile role if she does well in this autumn's Shadow Cabinet elections, and with a job in a future Labour government. But most MPs, some of them Labour, hold conventional views about the monarchy and its traditional trappings.
Moreover, Ms Mowlam's challenge to the Establishment on the tricky territory of the royals was being viewed in some quarters as less than helpful at a time when Labour has made itself significantly more 'electable' in the eyes of the public.
Some Labour MPs said the monarchy's days were numbered and the idea a 'load of rubbish.' Party sources were quick to emphasise that Ms Mowlam's views were purely personal. There was 'absolutely no chance' of the proposal becoming policy, one said.
Her opposite number, Stephen Dorrell, Secretary of State for National Heritage, led a chorus of criticisms from Tory MPs, dismissing the idea as 'bizarre' and a 'silly season notion'.
Ms Mowlam's suggestion in a Mail on Sunday article coincided with yesterday's opening of Buckingham Palace to the public for the second time. About 400,000 people are expected to visit the palace this summer. Mr Dorrell said: 'People will wonder how on earth it can be that a frontbench spokesman can seriously be talking about spending significant sums of money building a new royal palace when existing royal palaces have a very clear place in public affection.'
The article poured scorn on Buckingham Palace's 'lurid decorations and unhomely feel' and suggested that the upkeep costs of other palaces - such as Kensington Palace, the Princess of Wales's residence, and Holyrood House, the royal family's Scottish home - could be paid for by their inhabitants.
Ms Mowlam insisted she was not anti- monarchy. 'The project could truly be seen to be an expression of public enthusiasm for the monarchy and a celebration of Britain's designers, craftsmen and women, and architects.'
Just as Victorian buildings defined the spirit of the age, 'our most powerful symbol of nationhood, the monarchy, could do with such a gesture of self-confidence'.
Ms Mowlam conceded yesterday that the project was not high on the list of Labour's policy priorities, but said she wanted a debate on the topic. 'We've got great architects, great designers. Let's have something different in addition. I want the kind of tradition and heritage of the old castles and the old palaces.
'But I want something new so in 50 years' time we can look back and say as we went into the 21st century we as Britain celebrated our monarch in a different way. She added that she was not proposing to throw out the Queen. 'I don't regret having said it. I think the monarchy has to carry on changing and adapting and it is something positive.'
Buckingham Palace maintained an official silence.
John Blackburn, vice-chairman of the Tory backbench arts and heritage committee, said: 'It is beyond belief that the British public would ever dream of accepting such a misguided and foolish concept.'Reuse content