Smear allegations reopen row between Chancellor and Blair

A furious Gordon Brown last night authorised an astonishing attack on Downing Street for allowing an orchestrated campaign of "lies and distortions" about the Chancellor's conduct over policies on Europe, taxation and the public finances.

The blistering response by the Chancellor to reports of a new book by a former Downing Street aide left Tony Blair's most senior advisers "bewildered" and threatened to reopen the long-running feud between the two men.

The Chancellor's most senior allies in the Cabinet will be dismayed at Mr Brown's response to the report in a Sunday newspaper that Derek Scott, a former economic adviser to Mr Blair, is planning to publish an account of their "furious rows" over European and pensions policy, "fights for territory" in Whitehall and the state of "unbearable tension" between them before Budgets and major public spending announcements.

Sir Andrew Turnbull, the Cabinet Secretary, is pressing Mr Scott, who left Downing Street last December, to remove the most damaging parts of his account from his book, called Off Whitehall.

Accounts of splits between the Prime Minister and the Chancellor have been played down by Downing Street and Treasury spokesmen since Mr Blair and Mr Brown reached a fresh accord last autumn, brokered by John Prescott, the Deputy Prime Minister.

However, that understanding was torn apart yesterday when the Chancellor authorised an attack that was plainly directed at Downing Street.

The spokesman for the Chancellor, using unusually candid language, said: "This deliberate peddling of lies and distortions about Europe, tax and public spending and the management of public finances is deliberately designed and orchestrated to put the Treasury in a bad light and will not be tolerated."

The row broke as Mr Blair was in Turkey for the Nato summit. Last night his senior advisers were baffled by the Chancellor's behaviour. "I am bewildered by it," one senior aide to Mr Blair said after being told of the reports that a furious Chancellor had authorised the statement.

The Chancellor's aides made it clear that the statement was directed at Mr Scott and his publishers, but did not deny that Mr Brown saw Downing Street fingerprints over the account and included Mr Blair's advisers in the general condemnation of the orchestrated campaign against him. Mr Blair's allies will see the Chancellor's heated response as further evidence of suspicions, verging on a persecution complex, inside No 11.

His belief that forces inside No 10 are out to destabilise his position in the run-up to the general election threatens to undermine the Government's campaign for a third term.

It is likely to be followed today by a concerted attempt by both camps to patch up their differences. It is certain to mean that Mr Blair will have to repair the damage as soon as he returns from Turkey.

However, it also points to the temporary nature of Mr Brown and Mr Blair's last attempt to heal their rift and will be exploited by the Opposition.

¿ Support for the Labour Party has fallen from 42 per cent at the time of the 2001 general election to 33 per cent now, according to a YouGov poll. However, the Conservatives have failed to capitalise on the boost they received when Michael Howard became leader. Three years ago the Tories won 33 per cent of the popular vote. They are now on only 34 per cent.