Morgan steps down as key Blair aide

Tony Blair's political fixer Sally Morgan has announced that she is leaving Downing Street as part of an exodus of the Prime Minister's most loyal and trusted aides.

Tony Blair's political fixer Sally Morgan has announced that she is leaving Downing Street as part of an exodus of the Prime Minister's most loyal and trusted aides.

Baroness Morgan of Huyton has been Mr Blair's go-between with the party and the unions since he came to power in 1997.

Those close to the Prime Minister denied last night that the exodus marked a draining of power from Downing Street after the his election setback.

Mr Blair is replacing Lady Morgan and other key advisers with more young modernisers, underlining his determination to surround himself with New Labour advisers.

A Blair ally said: "Like Alastair Campbell, she will still be around to give advice, but she finds its difficult to keep doing the full- time role."

The creation of a new "sofa cabinet" around Mr Blair could exacerbate his problems with the left wing and supporters of Gordon Brown, who are warning him to listen to the voters who gave him a bloody nose at the general election.

Writing in The Independent today, Mo Mowlam, the former cabinet minister, says only a change in the voting system will bring about a change in the way Britain is governed.

She says it will soon become apparent that Mr Brown will change nothing.

"He will disappoint old Labour ... he will scare the middle ground by looking too left wing. If we add to this that his management style is even more arrogant and exclusive than Blair, we have a dangerous cocktail for Labour," she says.

Lady Morgan, who is likely to go into the private sector, will be replaced by Matthew Taylor, former head of the Institute for Public Policy Research, the New Labourite think-tank which wrote the Labour election manifesto. His former deputy, John McTernan, is being brought in to replace Pat McFadden, the political secretary, who won a seat at the election.

Phil Collins, director of the Social Market Foundation think-tank, and Conor Ryan, David Blunkett's former special adviser in education, are being brought in to strengthen the Downing Street policy unit. Jo Gibbons, former special adviser to Baroness Jay and lately Alan Milburn, will work alongside Mr Taylor and Ruth Turner, a member of Labour's NEC.

Lady Morgan, whose official title as director of government relations is unlikely to continue, has been a key player in Downing Street in helping Mr Blair manage a sometimes reluctant party. She was involved in the private talks with Lord Falconer of Thoroton and the Attorney General before Lord Goldsmith changed his advice to the Cabinet that the Iraq war was legal.

Left-wing Labour MPs were plotting last night to force a showdown with Mr Blair today to derail his New Labour agenda for the third term. The MPs are to tell Mr Blair in a meeting behind closed doors that his "bloody nose" at the polls was not just due to the war.

Mr Blair is expected to tell the main troublemakers at a meeting of Labour's parliamentary party that they risk throwing away Labour's third election victory by rocking the boat.

A senior Blair adviser said: "They seem determined to turn the Tory catastrophe at the polls into a success." But they are in no mood to listen to lectures. John McDonnell, chairman of the group, said if they were threatened with barracking, or heavy pressure from the whips, they would walk out of today's meeting.

Mr Blair met new Labour MPs in a Commons room off Westminster Hall yesterday and quickly left without making any public speech, in contrast to his jubilant appearance with his new "Blair Babes" in 1997.

As the new MPs were being introduced to the Commons yesterday, the 40-strong campaign group was meeting in secret to hatch the plans for today's confrontation.

They will tell Mr Blair his Commons majority was slashed to 67 because of anger at a range of New Labour policies including the use of more private companies in the NHS, tuition fees, and a failure to tackle the collapse of pensions.

The MPs have more power in the Commons because Mr Blair's reduced majority means they can join the Liberal Democrats and the Tories in blocking legislation. Mr Blair could be faced with his first Commons defeat over ID cards within weeks of the Queen's Speech next Tuesday.

Frank Dobson, the former health secretary, said: "London has major council elections next year. It will be hard enough to do well anyway, but it will be very difficult if he [Mr Blair] is still the leader of the party."

Blair's fixer-in-chief reached decision at Christmas

Baroness Morgan of Huyton will be sorely missed in Downing Street, according to one of Tony Blair's most trusted allies. "She is political down to her finger tips," he said.

Lady Morgan, 45, has been Mr Blair's political fixer for more than 10 years. She was involved in the talks with the Attorney General, Lord Goldsmith, and Lord Falconer of Thoroton, Mr Blair's close friend, before Lord Goldsmith changed his legal advice on the war in Iraq.

She cut her teeth as a student organiser in the 1980s at the Institute of Education, and later became Labour's key seats organiser under Neil Kinnock.

After the disappointment of Labour's defeat in the 1992 election, she became the party's director of campaigns. Mr Blair appointed her as his go-between with his party when he became the Labour leader and, after winningpower in 1997, he brought her into Downing Street as his political secretary.

She fell out with Anji Hunter, the director of political and government relations, known as the "gatekeeper", over personal status and access to the Prime Minister, and went to the Lords in 2001. But she was brought back as "schmoozer in chief" with business and the unions after the election that year when Ms Hunter left Downing Street for BP.

Lady Morgan's friends said she came to her decision to leave No 10 after the election over Christmas. "She has been working for Tony for 10 years and she has got kids who are taking GCSEs, so she felt it was just too much being on call for 24 hours a day," said one friend.