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Kelly's shock resignation stalls Brown's revival

Mysterious 3am briefing to deny minister was part of an anti-Brown cabal

Senior ministers have demanded that Gordon Brown shakes up his "dysfunctional" Downing Street machine at the same time as a cabinet reshuffle expected next week.

Despite a poll suggesting that Mr Brown's speech has helped revive his political fortunes, several ministers have warned him privately that his attempt to launch a political fightback will stall unless he makes his No 10 operation more effective. Their criticisms include slow decision-making, a lack of co-ordination and a failure to respond effectively to political attacks. Ministers say that when they submit policy proposals to No 10 it takes months for them to be approved while Tory proposals go unrebutted.

For example, Downing Street's response to a recent Tory claim that they were the "party for the poor" was to promise a White Paper on social mobility in November, critics say.

Ministers are also worried by allegations that some of Mr Brown's opponents have been "bullied and rubbished". They cite criticism of David Miliband, the Foreign Secretary, after he staked his claim as a future Labour leader in July.

One cabinet minister, who wants Mr Brown to lead Labour into the next election, said: "The deal is that we will back him – but in return, he has got to shake up the No 10 machine. We cannot go on as we are."

Stephen Carter, who was hired as Mr Brown's strategy chief from the public relations firm Brunswick in January, may leave his post as part of the reshuffle. He may be elevated to the House of Lords so he can become a minister. Although Mr Carter is said to have been sidelined recently, Brown aides said he could "leave on a high" after the Prime Minister's successful speech to the Labour conference.

There was anger among Brown allies because positive media coverage of his make-or-break address was brought to a sudden halt by the news that Ruth Kelly, the Transport Secretary, will leave the Government in the reshuffle.

According to the first survey taken since Mr Brown's speech, the Tories'20-point lead has been halved. The YouGov survey of 1,500 voters for today's edition of The Sun puts the Tories on 41 per cent, down 3 points on the company's poll last weekend; Labour on 31 per cent (up 7) and the Liberal Democrats on 16 per cent (down 4).

Ms Kelly's departure was confirmed at 3am yesterday in an extraordinary briefing by aides in the foyer of the Midland Hotel in Manchester after a frenzy of rumour and speculation. Word spread like wildfire as Mr Brown attended a News International champagne and bacon butties party, hosted by James Murdoch.

The speculation began on BBC TV's Newsnight. After midnight, Downing Street went into crisis mode when told the BBC was to run a story saying Ms Kelly was among a group of dissident ministers ready to resign from the Cabinet in protest at Mr Brown's leadership.

Brownites suspect the rebel Labour MPs trying to oust Mr Brown were behind the leak, seeing it as a calculated attempt to rain on his conference parade. "This looks like an attempt to destabilise him, to stop him achieving any momentum," one said. Before the conference, some rebels had predicted "an event" at the end of it.

Ms Kelly denied she was unhappy with the Government's direction. She insisted she told Mr Brown in May that she wanted to step down. "I have not been part of any plot about the leadership. I have not been part of those sorts of discussions."

The plot thickened when Ms Kelly said she had "absolutely no idea" how her secret emerged. "I was shocked when I first heard the news." Her remarks fuelled speculation that No 10 was involved in "dirty tricks".

Brown aides dismissed as "laughable" suggestions that they would leak the news only hours after the Prime Minister's speech in order to "isolate" her from other potential cabinet dissidents. Another explanation is that the BBC got a scoop about Ms Kelly's intentions and that anti-Brown rebels stirred the pot by claiming her exit was part of a wider plot to topple the Prime Minister.

Yesterday, some Brown allies said that Ms Kelly's solo exit demonstrated that the prospect of a string of cabinet resignations had receded.