Stop the drift, top ally warns Blair

Stephen Byers says Labour is losing direction, lacks political momentum, and needs relaunch in wake of Hutton inquiry

Tony Blair is today given a stark warning by one of his closest political allies that his Government has "lost its momentum and sense of political direction".

Stephen Byers, writing in The Independent on Sunday, calls on the Prime Minister to stop attacking his party and unite it with a major relaunch after the Hutton inquiry and the rebellion over university top-up fees next month.

The former secretary of state for transport, who has been asked to help to prepare Labour's next manifesto, launches a barely coded attack on some of those who have been advising the Prime Minister since Alastair Campbell's departure. He suggests that there is now a sense of drift in Downing Street.

The Prime Minister must "move beyond defensiveness" with a "statement of principle and values" to end the sense of crisis, his close ally says.

"This would be the best response to those who are concerned that the Government has lost its momentum and sense of political direction," Mr Byers writes.

In an implicit criticism of the current strategy, he says that the relaunch must be more than "a range of worthy small-scale initiatives to placate the 24-hour news media or a position taken in response to the demands of an interest group".

Mr Byers says Michael Howard's leadership of the Tory party should prompt Mr Blair to stop "defining himself... against the old Labour left". "Now is the time for Tony Blair to draw up dividing lines and define himself and New Labour against the political right," the former minister writes. Although allies stress that there is to be "no retreat" on the issue of top-up fees, a number of concessions are likely to be made in the coming week to head off a humiliating defeat.

Friends of Mr Blair confirm that the Prime Minister is overseeing the preparation of what one calls an "exit strategy" to draw a line under the most difficult period of his leadership.

The publication of the Hutton report into the death of the scientist Dr David Kelly is likely to be followed by a Cabinet reshuffle as Mr Blair struggles to regain the initiative.

"The challenge for Tony is that he has to find the language to define himself against the Tory right," said one ally. "He did that in the early days of opposition but has not in recent years."

Although there is agreement within Downing Street on the need for a strategy to take on Mr Howard, there is disagreement about its timing.

Some are pressing Mr Blair to relaunch in time for the local, European and London mayoral election campaigns while others fear bad results could "derail" the exercise.

The spending review in early summer has been identified as an alternative platform if Mr Blair fears a humiliating wipe-out. The decision on whether to readmit London's Mayor, Ken Livingstone, to the Labour Party, expected on 6 January, will heavily influence the timing of the relaunch.

* Stephen Byers highlights the issue of increasing personal debt as a potential political pitfall for the Government.