Just what are Milburn-Byers up to now?

There is a real ideological divide in the Government over the policies which should be pursued if it wins a third term

Why should "an over-promoted bloody popped-up backbencher" pop up in these pages yesterday and tell the Chancellor of the Exchequer to stop sulking in his tent? Is something going on? Can we all join in? The article by Stephen Byers in yesterday's Independent was possibly the least effective summons to Labour unity since Jim Mortimer, the party's general secretary in the Eighties, announced at a news conference in 1983 that the National Executive had just met and unanimously agreed that Michael Foot was leader of the Labour Party.

It was John Prescott who called Byers "an over-promoted etc". Or, rather, he didn't. At a meeting with local council leaders in October, the Deputy Prime Minister applied that rich stream of epithets to Alan Milburn, who had just returned to the Cabinet as policy chief in charge of the election campaign. When news of his tirade reached the press, Prescott's spokeswoman had an unusual explanation. She did not deny the words, but said that he had been referring to Byers, not Milburn. Apparently, one of the council leaders had asked him what he thought of Milburn's idea of replacing the council tax with a combined local income tax and property tax. Instead of correcting the authorship of a plan that had in fact just been floated by Byers, the Deputy Prime Minister said: "He's of no value whatsoever, he's not even worth listening to. He's just a speculator, a policy outrider."

As far as Prescott is concerned, Milburn and Byers are basically the same person, and the fact that one of them is now a Cabinet colleague again is a technical detail requiring the proprieties to be observed, but it does not alter his view of their joint political outlook. When Milburn was out of the Cabinet, Prescott had a go at "these scribblers, the thinkers, and this new group calling themselves outriders" - which is what journalists had taken to calling Milburn and Byers. The two have been friends and political allies since they both entered the House of Commons for north-eastern seats in 1992. More to the point, however, they had both been invited by Blair to help draw up the manifesto for the next election, which made Prescott's attempt to portray them as not just outriders but outsiders disingenuous.

Byers's article yesterday, therefore, was not what it seemed, namely "What I Thought About In The Holidays" by A Backbencher. It was clearly a warning, with the authority of Tony Blair and Milburn behind it. As such, it was unusually transparent by the standards of political code. "In order to court popularity" with members of the Labour Party, Byers wrote, "potential candidates" to succeed Blair might be tempted to advocate a "slowing down in the pace of modernisation" of public services. "While such an attitude might work with the party faithful it would fail the people who depend on our public services."

In other words, no posturing to the unreconstructed party membership, we've got the national interest to think about. "Choice, diversity and contestability must be at the heart of any programme that is serious about the reform of public services." Byers is absolutely right, of course, which only makes his heroism in saying so the more remarkable. Especially when it contradicts both the Chancellor and the Deputy Prime Minister.

When Prescott attacked the "outriders" in May, he had a go at "this whole argument about choice" which was being used to demand more and more reform. "The problem with the reforming argument is that you always have to criticise what you've done. It's all right in opposition - or even when you've been in government for three years - but when it is seven years you have to be proud of what you've done." That was the case for consolidation in a nutshell, and Blair, Milburn and Byers have rejected it.

Nor are they much more patient with Gordon Brown's elevation of the "ethos of public service" as a rival motor of reform, especially in the NHS. Byers is polite about such language, which the Chancellor used in his conference speech, but makes it clear that "choice and contestability" are better.

What Byers did do yesterday, though, was to make more explicit the deal he offered on Blair's behalf to Gordon Brown and Prescott in a speech last month. Then, he suggested achieving a "progressive consensus" - Brown's phrase in his Brighton conference speech - by being clear about the limits played by the private sector in public services.

Yesterday he said that if "we" put "boundaries" around the operation of market mechanisms in the provision of public services, it would "reassure people" - presumably he means the Chancellor and the party members whose support he courts.

This is extraordinary, even without the sinister, commissar-language of Byers's closing paragraph - "the Labour Party will rightly expect all those in positions of authority to support the agreed position". Yet this is no mere "Gordon and John hate Tony, Alan and Stephen" soap opera. There is a real ideological divide within the Government over the policies that should be pursued if it wins a third term. Most of the disputes may seem technical, but they affect millions of people, especially the poor.

The Prime Minister has been impressed, for example, by the way in which the mere threat of bringing in private providers has forced the NHS to start clearing waiting lists and sees no limit to the application of that principle. Milburn, meanwhile, wants to give housing association tenants the same right to buy their homes as council tenants - yet Prescott in his party conference speech declared: "It ain't going to happen. Those homes are not for sale." Milburn and Byers are both keen to give vouchers to old people so that they can buy their own long-term care, meals on wheels and transport instead of relying on their local council - yet Prescott is against it.

In each case, Prescott, who is not only the Deputy Prime Minister but more importantly in this context deputy leader of the Labour Party, has a firm grip on what "might work with the party faithful", in Byers's dismissive phrase. But Milburn and Byers have the Prime Minister's support in pressing ahead with the Blairite revolution. What, though, was Byers's motive in writing such a provocative article advertising divisions in Cabinet under the guise of warning against them?

It may well be that old Blair trick of running against his party. The Prime Minister is calculatedly reckless about playing up "Old Labour" attitudes in his own Cabinet in order to emphasise how much the party and the country need him to keep the show on the road. He knows that consolidation is no way to run a government, any more than it was when Margaret Thatcher scornfully asked her more faint-hearted ministers whether "consolidation" was a word that the Tory party could "stitch to its banners".

At a human level, it is surprising that Brown and Prescott put up with being portrayed as the enemy within, but they are engaged in brute politics as much as Blair is, and will strike if he shows weakness. For the moment, though, Blair still carries all before him, and Byers popped up just to remind anyone who thought otherwise.

j.rentoul@independent.co.uk

The writer is chief political commentator for 'The Independent on Sunday'