Ministers admit the widespread impression among voters that cuts in spending will be needed to balance the nation's books has blunted the Prime Minister's attacks on David Cameron and his party.
In a tacit admission that big savings will have to be made whoever wins the general election, Labour will claim there is a "fundamental difference in instinct and ambition" between the two main parties. It will accuse Mr Cameron of following a Thatcherite policy of "unfair" tax and spending cuts, while arguing that Labour's instinct is to protect frontline public services. Ministers hope that a return to economic growth by the end of this year will enable them to be more optimistic about future levels of spending on health and education by the election, expected next spring.
The Cabinet has discussed updating Mr Brown's traditional dividing line of "investment versus cuts" dividing line at its recent meetings. Although ministers denied there was a row at yesterday's weekly session, there were reports that some members had called for new language such as "targeted investment" rather than "spending", and put more focus on the need for "efficiency savings".
Some ministers want a more realistic message which admits that Labour will not be able to continue the big rises in public spending seen in recent years.
Public scepticism about Labour's message was revealed in a ComRes poll for The Independent yesterday which showed that 31 per cent of people trust the Tories most to decide where spending cuts should be made, while only 21 per cent trust Labour most.
Alistair Darling, the Chancellor, is said to be moving towards a decision to postpone a government-wide spending review until after the election. The Tories accused Labour of covering up the need for "Labour cuts". Last night George Osborne, the shadow Chancellor, claimed the Government had denied him access to a government database on what has been spent in 12,000 key areas. This is not normally shown to opposition parties.
Mr Osborne told the BBC that only spending on health and international development would be explicitly protected by a future Tory government. Asked about other areas such as schools and the SureStart children's centres, he replied: "I am not protecting other areas at this stage."
Mr Osborne said the policy blueprint unveiled by Mr Brown on Monday was already unravelling, amid doubts over how the flagship pledge to boost housebuilding by councils and housing associations would be funded. "Gordon Brown's latest relaunch has disintegrated into chaos and shambles," he said. "This is because he is not being honest about spending. While Cabinet ministers are arguing over whether or not to tell the truth, international bodies are tearing apart Labour's fiscal policy. This relaunch has been exposed as being more about propping up Gordon Brown's future than about the future of Britain."
But Liam Byrne, the Chief Secretary to the Treasury, accused Mr Osborne of making an "utterly misleading allegation" about access to information "to distract attention from the fact that he would cut SureStart and cut schools spending."
The Department of Communities and Local Government insisted that the prposals for an extra 20,000 affordable homes over the next two years were fully funded.
John Denham, the Communities Secretary, will today defend controversial plans to change the way social housing is allocated so councils can give greater priority to local people. That has prompted criticism that Labour is fuelling untrue allegations that immigrants are jumping the housing queue.
Mr Denham will argue Labour's traditional approach to "fairness" is "out of touch" with the public mood and that it needs to be "in tune with the robust, tough, but popular view of fairness held by the British people". He will tell the Fabian Society that the left would have to trust people's instincts, which is why he is giving more say to local people in deciding how social housing allocations.
Labour needs to stop defining – even inadvertently – the bottom social groups against the middle classes, he will argue. "We need to stop implying that we are chiefly on the side of the poorest and most deprived in society but instead develop a language which is more inclusive," he will say.
Labour's four tops: Hitting the same note?
Gordon Brown
Had to abandon plan to install close ally Ed Balls as Chancellor in the emergency reshuffle after an attempted coup by Labour MPs. Reluctant to admit that capital spending would fall under Labour, fearing that doing so would blunt his attack on "Tory cuts". Under pressure to change his line to make the general election a choice between which party can be trusted to make "fair" savings.
Alistair Darling
Rebuffed Brown's attempt to prise him out of the Treasury. Favours more open approach than Brown about need for spending cuts after 2011 to balance nation's books. Has not made final decision to delay comprehensive spending review until after election but moving that way. Embroiled in row with Bank of England over regulatory system for banks.
Ed Balls
Long-standing goal of becoming Chancellor thwarted by Alistair Darling in reshuffle. Accused of flexing muscles since then to further his Labour leadership ambitions. Called for an inquiry into the Iraq war to be as open as possible. Has predicted that Labour would continue to raise spending on education and health after 2011 – a view the Treasury declined to endorse as plans are not yet set in stone.
Lord Mandelson
Biggest winner in the reshuffle, helping Brown see off plotters. Became First Secretary and head of Department of Business, Innovation and Skills. Honed the "Building Britain's Future" blueprint, but sparked confusion by predicting comprehensive spending review would be postponed until after general election, which Treasury refused to confirm.
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