Tony Blair had to call off last week's planned cabinet reshuffle after furious objections from his deputy, John Prescott, to a proposal to sack the Labour Party chairman, The Independent on Sunday can reveal.
Ian McCartney, who was appointed by Mr Blair 15 months ago to head the party machine, has been criticised for Labour's poor performance in last month's local elections.
Yesterday, the Prime Minister paid Mr McCartney a generous tribute in front of hundreds of cheering and applauding party activists at Labour's National Policy Forum in Coventry.
The three-day forum has been the scene of tense negotiations between the party leadership on the one side, and an alliance of union and council leaders on the other, which wants the party to return to more traditional policies on education and employment rights.
Earlier in the week, Mr Blair had proposed to move Mr McCartney, who is trusted by the unions and party activists, to make way for someone more "media-friendly" such as the Secretary of State for Culture, Tessa Jowell.
The proposal was solidly opposed by John Prescott. Mr McCartney is a former seaman and Mr Prescott a former ship's waiter, and both have spent most of their adult lives in the labour movement.
Mr Prescott is believed to have warned the Prime Minister that he would provoke waves of resentment from activists if he fired Mr McCartney in the same week that he nominated Peter Mandelson to be the next UK commissioner in Brussels.
Mr Mandelson has insisted that he was given the job because he was the "best man", not because of his 20-year friendship with the Prime Minister. He told The Guardian: "He does not reward people because they are friends or cronies or because they are right-wing or left-wing. He gives people jobs on merit."
But the appointment has been criticised by Mo Mowlam, Mr Mandelson's predecessor as Northern Ireland Secretary, who warns in this newspaper that his arrival in Europe will increase Britain's reputation for being "duplicitous".
Yesterday, before flying off on holiday to Barbados, Mr Blair exhorted his party not to relax but to embark on a "process of permanent policy renewal". In remarks aimed at his internal opponents, he told members of the National Policy Forum that it was not their "job to disagree" with voters who "want things done a different way".
He hinted at new policies to extend free childcare from deprived to middle-class areas, and announced a commission on women and work to examine the gender pay gap. Patricia Hewitt, the Secretary of State for Trade and Industry, said later that the new body would examine why there was "segregation" in the workplace with low-paid work often dominated by women. Delegates will also agree today to consider including in the party's next election manifesto a promise to give councils the power to ban smoking in public places.
Charles Clarke, Secretary of State for Education, was holding a series of meetings yesterday, in the hope of heading off a gathering revolt over his proposal to allow all secondary schools to select up to 10 per cent of their pupils.
The revolt was led by Sir Jeremy Beecham, former leader of Newcastle City Council, who had a private meeting with Mr Blair on Wednesday last week, at which the Prime Minister tried unsuccessfully to persuade him to accept the new policy.
Party managers are hoping to avert a vote on the issue today, fearing that they would be defeated by a combination of councillors, party activists and union leaders who oppose selection based on academic subjects. The policy is less controversial when it is applied to subjects such as music and sport.