Days after tensions surfaced among ministers over education reforms and banning smoking in public places, moves by the Prime Minister to overhaul the incapacity benefit system have provoked government in-fighting.
As Mr Blair seeks to secure his legacy, resistance is also growing in Whitehall to his "respect agenda", including proposals for a fresh drive against antisocial behaviour. Mr Blunkett is understood to have sent a strongly worded letter late last week to Downing Street warning that he cannot accept demands to toughen up proposed legislation.
The Prime Minister's advisers are believed to be pressing for the means-testing of payments to ensure that better-off disabled claimants do not qualify.
They are also calling for a limit on the amount of time for which benefits can be claimed, and for some payments to be made in the form of vouchers for job-training schemes.
Other ideas being floated include naming those doctors who approve the most applications, and giving employers the right of appeal when an employee is signed off sick.
Mr Blunkett is said to have protested that any such measures would go too far and threaten to humiliate the disabled, as well as complaining over excessive interference in his department.
He is likely to be supported by several cabinet colleagues, and any such moves would also be guaranteed to spark a Commons rebellion among Labour backbenchers.
John Reid, the Defence Secretary, conceded yesterday that there were divisions in the Cabinet over crucial issues. "These are all highly sensitive, highly controversial subjects," he told the BBC yesterday. "But they are what people are concerned about. And this Government has made absolutely plain we are going to be radical, we are going to push forward reforms. Because they are controversial, will not stop us doing them. We will do them and we will capture the future, because we will push forward reforms in all these areas."
But David Laws, the Liberal Democrats' work and pensions spokesman, said that the government squabbling was preventing urgently needed reform of the welfare system.
He said that Mr Blunkett was "weakened and distracted" while the Prime Minister was making up incapacity benefit policies "on the back of a fag packet".
Meanwhile, the Government is backing off from a suggested ban on drinking alcohol on all forms of public transport in an attempt to combat yobbery. It was among several ideas examined by Mr Blair's "respect unit", headed by Louise Casey, his antisocial behaviour tsar. The proposal was mocked yesterday as "nanny statism" by opposition parties and transport companies.
Last night a Downing Street spokeswoman said: "There aren't any plans to introduce a blanket ban on drinking on public transport. If it happens, it will be targeted to tackle a particular and specific problem."
Mr Blair has put his "respect agenda" at the heart of his personal programme before he steps down as Prime Minister.
The strategy was due to be published before Christmas but its publication could slip into the new year.