Downing Street seethes as the mole hunt begins

The mood in Downing Street was black yesterday. A second highly damaging leak from Tony Blair's inner circle within 48 hours had overshadowed the Government's carefully planned relaunch.

The mood in Downing Street was black yesterday. A second highly damaging leak from Tony Blair's inner circle within 48 hours had overshadowed the Government's carefully planned relaunch.

As ministers and Labour MPs speculated about a mole inside No 10, one Blair aide snapped: "When we find him or her, we will string them up. It will be a long, slow torture."

Ministers had hoped to spend two weeks announcing their three-year spending programme in a "dance of the seven veils" that would set the political agenda. As they toured the television and radio studios yesterday, their irritation was clear as they were asked questions about the spate of leaks.

Only a day after a memo by Mr Blair admitted that he and his government were seen as "out of touch with gut British instincts" on key issues, a leaked report by his pollster Philip Gould said the New Labour brand had become "contaminated" and that the party's majority could "fall dramatically" at the next general election.

The main questions being asked at Downing Street yesterday were: Who is the leaker? Are the Tories involved? Has someone hacked into our computer system? Have e-mails or faxes been intercepted?

At about the same time as Mr Gould fired his typically apocalyptic warning shot, the Prime Minister's press secretary, Alastair Campbell, sent Mr Blair a note warning that the Tories' main line of attack on the Government would be to depict it as "all spin and no substance".

Yesterday Mr Campbell dusted down his remarkably prophetic report, which was not leaked to the press, as he wondered how the series of disclosures had happened. He said: "They are all focused on this single point - that the Government is more interested in presentational issues than substance and delivery. It's complete nonsense."

Mr Campbell pointed out that Mr Blair's memo and three written by Mr Gould were composed at about the same time in April and May. It appeared that "someone has got a job lot of memos written over a period of time".

But Mr Campbell was more upbeat than some colleagues in Downing Street. He insisted: "When it all blows over, you will have a government left standing that is delivering and can show that it is delivering and an opposition that is going to have to answer some pretty tough questions."

Although Mr Blair does not know how the leaks have happened, his aides have one or two theories.

They suspect the weak link in the chain is Mr Gould, who received the Blair memo as well as seeing three of his own missives leaked. No one in Downing Street believes Mr Gould is responsible, and Mr Blair is standing by his man despite pressure from Labour MPs and some ministers to dispense with his services.

One scenario would be a breach of security at Mr Gould's home in north London or at his office overlooking Blackfriars Bridge. But this is believed to have been discounted by security experts.

Another option is that material was inadvertently mislaid by Mr Gould or stolen from him. But there is no evidence to support this and his copy of the Prime Minister's memo is still safe under lock and key.

However, there is a common factor to the memos leaked out. Mr Gould's first two memos were passed to the "Insight" team at The Sunday Times. Mr Blair's report and Mr Gould's third document were disclosed to The Times and The Sun.

The three papers are part of Rupert Murdoch's News International empire. One theory at No 10 is that The Sunday Times offloaded the Blair and third Gould memo to two of its stablemates because the methods of the Insight team were under close scrutiny in response to its disclosures about the tax affairs of Lord Levy, a Labour donor and Mr Blair's envoy to the Middle East. Lord Levy has complained to the Press Complaints Commission after the Inland Revenue confirmed that someone impersonated him to obtain details of his tax records.

Downing Street is convinced that the Tories have had a hand in the private reports reaching the newspapers. Challenged by Labour MPs on this yesterday, the Tories pointedly refused to confirm or deny any involvement.

Michael Ancram, the Tory chairman, said: "The idea that we are being provided by Tony Blair or Gould with messages which we are supposed not to leak is ludicrous and I think the whole thing is laughable."

One possibility is that News International passed on its ticking time-bombs to the Tories on condition that the party leaked them to its two daily papers when they decided to detonate them. That could explain the time lag between the leaking of the first two Gould memos and this week's disclosures.

If this theory is right, the Tories' timing could hardly have been more devastating.