How much longer can Gordon and Tony be the neighbours from hell?

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Now that the Conservatives are on their best behaviour, a great responsibility falls upon the Government to provide some back-stabbing entertainment of its own. Always eager to oblige, Tony Blair and Gordon Brown have moved swiftly to fill this sudden gap in our political culture. The Prime Minister stabbed the Chancellor by refusing to give him a seat on Labour's National Executive Committee. Instead of nursing his wounds, Brown got up and told the world about his humiliating rejection. For good measure, he wrote what was widely seen as a Eurosceptic article for The Daily Telegraph, just as Blair was trying to revive his battered pro-European credentials. Labour's two titans are giving a passable imitation of the Conservative Party at its most torrid prime.

As is often the case with these two, nothing was quite what it seemed. The Chancellor's hyperactivity last week has been reported at the same loud volume as if every intervention was equally calculated, a dagger in the back of Blair here, a dagger in his front there. An observer from another planet might have been puzzled by a man whodotingly changes a nappy while simultaneously planning to knife the Prime Minister. Observers closer to Downing Street were certainly taken aback.

In fact the context for the Chancellor's sudden high profile had less to do with his tortured relationship with his neighbour than another matter. He returned to work with the rise in interest rates uppermost in his mind. During his paternity leave he resolved to put the case for his stewardship of the economy before the announcement on interest rates was made last Thursday. First, he wrote the article hailing Britain's stability and urging other EU countries to be more flexible and competitive. Then he arranged for a series of pre-emptive television interviews, just hours before the interest rate rise on Thursday morning. During these exchanges Brown confirmed that the Prime Minister had vetoed his desire to sit on Labour's national executive. His digs at Blair, although carefully calculated, mattered less to him than his almost neurotic desire to counter reports in the media that the economy was weak and getting weaker.

For Blair and his senior allies perceptions about the economy were the least of their problems. "He is knifing Tony by pretending to be a Eurosceptic", was one of the politer assessments of Brown's article. After his round of interviews they hit the roof, suggesting that he had overplayed his hand, risked being sacked and had hardened Blair's resolve to stay in his post for as long as possible.

The eruption of tension over Europe was a red herring. In the supposedly controversial article Brown even dared to state that he was writing as a "pro-European". There was not very much, if anything, in the article that Blair would disagree with. Indeed, he has made the same points himself many times. The row over Brown's desire to be on Labour's national executive was much more serious and has been simmering for two years. The Chancellor opposed Blair's decision to create a party chairman after the 2001 election. He was equally angry that he had not been consulted over such a significant reform. Ever since he has argued that a vibrant National Executive Committee would be a more successful way of reinvigorating the party and has been seeking a seat on the committee as part of the reinvigoration. During his paternity leave, he spoke with Blair most days on the phone, discussing a range of issues, including how they should deal with the new Conservative leader, Michael Howard. He returned to work and discovered on the Labour party website that his latest request to be on the NEC had been turned down without a word from the Prime Minister.

This seems a relatively trivial issue, but symbolises a more brutal battle about the future direction of the Labour Party and the Government. Some senior Blairites blame Brown for being in charge of a timid, conservative election campaign in 2001. They want a more radical manifesto at the next election, to give more momentum and sense of direction in a third term. The Brownites fear that what these Blairites mean by "radical" is some incoherent, superficially populist proposals by which they will attempt to out-Howard Michael Howard in reactionary zeal. On the basis of the last year, Brown has good cause for concern. Some of Blair's reforms for the public services were rushed through under the banner of "boldness" and are now starting to fall apart under more intense scrutiny.

This is why the relationship is incomparably more fragile than before. The two of them are starting to row more intensely over policy matters. Last month I wrote an article for Prospect analysing the ideological differences between the two men. Senior figures from both sides told me that I had understated the divide. That is how bad it has became: "You lot in the media should be reporting how seriously split the Prime Minister and the Chancellor really are."

The duo and their exhausted allies agree it cannot go on like this, but how can it greatly change? One option would be for Tony Blair to sack Brown, a scenario raised again longingly by one or two Blairites last week. This will not happen. After the war against Iraq, the most calamitous failure of British foreign policy since Suez, Blair is a weakened prime minister. If he sacked the Chancellor he would be even weaker and quite probably without a credible economic policy. Those Blairites who eagerly accuse Brown of overplaying his hand forget how strong that hand is. Another option would be for the Chancellor to resign. This is not impossible, as he is capable of reaching great depths of frustrated fury about the activities of his neighbour in Downing Street. Even so, he is determined to stay put. Similarly, it is not impossible that Blair will stand aside. He faces the Hutton inquiry, parliamentary revolts, no weapons in Iraq and violent chaos in Baghdad. This is not the most enticing of autumnal agendas, but he is resolved to fight a third election.

If all these apocalyptic options vary from impossible to highly unlikely there is one remaining path for the duo. In a way that cannot be underestimated, both of them are united in their burning desire to see off Michael Howard and propel the Conservatives to a third election defeat. They want the Tories to delight us once more with their back-stabbing destructiveness. The rise of Howard will breathe a bit more life into the dying relationship between the Prime Minister and his chancellor. It cannot go on like this, but it probably will.

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