Byers' praise for Milburn fuels leader row

The simmering row between Tony Blair and Gordon Brown returned to the boil last night when a leading Blairite said Alan Milburn would make an "excellent'' prime minister.

The simmering row between Tony Blair and Gordon Brown returned to the boil last night when a leading Blairite said Alan Milburn would make an "excellent'' prime minister.

And Mr Milburn became embroiled in controversy himself yesterday as Tories attacked the decision by the Cabinet Secretary to pay for his appointment to the Cabinet - to run Labour's next general election campaign - out of public funds.

Allies of the Chancellor are furious at Mr Blair's appointment to the Cabinet this week of the former health secretary and suspect that it is part of a long-term strategy to deny Mr Brown the crown after Mr Blair.

Stephen Byers, a former cabinet minister and ally of Mr Milburn, stepped into the row by raising the prospect that Mr Milburn could become the next Prime Minister. In an interview to be screened tomorrow on GMTV, he said: "I think he would be an excellent leader of the Labour Party and an excellent prime minister."

Mr Byers said Mr Milburn had not made up his mind about running for the leadership, when Mr Blair steps down. One of the reasons he had decided to accept the job in the Cabinet was that it was limited to the general election. "I think it would be a very difficult decision for him to take," said Mr Byers, who is also a North-east MP. "The reasons for which he resigned 15 months ago - to spend more time with his two young boys and Ruth, his partner, are still valid. I think Alan himself hasn't made up his mind."

Mr Milburn was appointed to the Cabinet on Wednesday as Chancellor of the Duchy of Lancaster, but with a brief to run the election campaign. The Cabinet Secretary, Sir Andrew Turnbull, issued a statement last night agreeing that he should be paid from public funds.

Liam Fox, the Tory party co-chairman, has written to Sir Andrew - the impartial head of the Civil Service - querying the decision, which he said had blurred the lines between legitimate government business and Labour's own interests.

Dr Fox was backed by Lord Tebbit, who was paid by the Conservative Party when he held Mr Milburn's current post while running Margaret Thatcher's election campaign in 1987. "The trouble with this Government is that it cannot distinguish between the national interest and the Labour Party interest," said Lord Tebbit.

On Monday, Mr Blair will try to use a speech to the TUC conference to reconnect with union leaders who have criticised his leadership, particularly over war on Iraq and private-sector involvement in public services.

Criticism of Mr Blair is likely to be muted, however, because Ian McCartney, the party chairman, brokered a deal with the unions some weeks ago on key demands, including forcing employers to guarantee that bank holidays will no longer be counted as part of annual leave.