Brown puts on a brave face as relations with PM hit an all-time low

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Gordon Brown reacted furiously yesterday to Tony Blair's decision to clip his wings by giving the Blairite Alan Milburn a pivotal role in Labour's general election campaign.

Relations between the Prime Minister and the Chancellor sank to an all-time low after Mr Blair used his cabinet reshuffle to reassert his authority by recalling Mr Milburn. The former health secretary will oversee government and Labour policies and spearhead the party's election effort, a job done by Mr Brown in 1997 and 2001.

Insiders said the one-time soulmates had "barely communicated" since July, when Mr Brown realised Mr Blair had abandoned the idea of standing down before the election. Mr Blair is believed to have told Mr Brown and John Prescott last November he was ready to quit this year if he was an electoral liability, but decided to stay on after his fortunes recovered.

Publicly, the Brown camp tried to shrug off Mr Blair's snub. But there was anger behind the scenes at the Treasury, where Mr Brown's inner circle was said to be "apoplectic". Some Labour MPs feared the Blair-Brown rift would destabilise the Government before the election, expected in May.

A combative Mr Milburn made clear he would call the shots. In media interviews, he said: "What has changed is that the Prime Minister has decided I should be in charge of general election planning and overall strategy and policy presentation and, crucially, the formulation and development of policy that will eventually lead, through the proper process, to a Labour manifesto." But he insisted Mr Brown would play an important role. "I will be saying to Gordon, as I have been to all my other colleagues, that what we have got to do is pull together," he said.

Mr Milburn said he would not have accepted a "red box" job in charge of a Whitehall department and refused to commit himself to staying in the Cabinet after the election. His decision to return to frontline politics less than 15 months after leaving the Cabinet to spend more time with his family has been a surprise. Mr Blair is said to have pleaded with Ruth Briel, Mr Milburn's partner, to support his early return when she opposed the idea.

Sources said Mr Brown's election role was unchanged as a member of the strategy group chaired by Mr Blair. They said Mr Milburn had taken the role of election co-ordinator from Douglas Alexander, a minister outside the Cabinet.

Mr Blair told the first meeting of his new Cabinet: "The launch of our five-year plans was an important milestone and we will continue to focus on policies that are relevant to the future of this country. We had a successful policy forum in July and we are determined to have a policy-rich, forward-looking agenda for our party conference."

Frank Dobson, Mr Milburn's predecessor as health secretary, said the drive for a radical manifesto could lose Labour marginal seats. He added: "The idea that going for radical change appeals to people has little electoral evidence behind it. Party membership has halved since 1997 and most loyal Labour MPs will tell you it is difficult to get their supporters out. I fear this will make it worse."