For the Government, politics has entered a more dangerous phase

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Blair appeals for backing from unions and backbenchers over private-sector plans

Departure of Monks will be serious blow for PM

Blair goes into Easter break in desperate need of respite

Anne McElvoy: If Mr Byers goes, so should Mr Brown and Mr Blair

The former Labour prime minister, James (now Lord) Callaghan celebrates his 90th birthday today. We wish him well. He has taken the opportunity to remind the political world that it is now almost a quarter of a century since he left office, his brief premiership being mostly a matter of survival against the odds and without a majority. He is thus able to see matters such as the present difficulties of Tony Blair – "our dashing Prime Minister" as he calls him – in a certain perspective. According to Lord Callaghan, such travails are all simply part of the natural cycle of politics: "The pendulum swings, and it will swing again."

There is something in what Lord Callaghan says. The speculation about a "stalking horse" to challenge Mr Blair's leadership is just that, and frothy with it. The truly puzzling feature of politics over the past five years is why New Labour's hegemony has persisted for so long. The reduction in Labour's lead to "only" nine points may be a shock to some, but to James Callaghan's government, such a turn of events would have been political nirvana. More voters think Mr Blair untrustworthy, but he is well ahead of Mr Kennedy and Mr Duncan Smith. So we must not exaggerate matters. The signs are that the political arena is becoming more competitive, and so returning to normality.

Mr Blair's most immediate problem can be summed up in two words; Stephen Byers. Not since Peter Mandelson has a single minister created quite as much trouble for the Prime Minister as the Transport Secretary manages to. He has demonstrated time and again that he is simply not up to a Cabinet job and Mr Blair's insistence on retaining him is odd. It may be that the Prime Minister does not want to emulate the example of John Major, and have the newspapers dictating his cabinet. Or he may have cynically concluded that he will let Mr Byers finish the dirty work of renationalising the railways before he sacks him. Even so, Mr Blair would have been better off immediately ditching a man who virtually admitted to lying to the public on television. He could still buy some political capital by allowing Mr Byers to pursue other interests.

Sacking a failed minister is one thing; far more tricky is how to deal with opposition to the essential task of reforming the public services. At Labour's National Executive Committee yesterday, for example, Mr Blair was confronted with a motion that blankly called on him to "halt any future moves towards the privatisation, partial or otherwise, of our public services". Mr Blair has never sounded a very confident note on this issue for very long; which could be a fatal error, given that this should be the defining mission of his government.

Sooner or later, Mr Blair will have to take on the vested interests and push reform through. Then he will know what real unpopularity is like. The suspicion is that he wants to go around the problem rather than confronting it head on, an instinct that has often served him well. But it must now be apparent that conflict of some sort with the trade unions, many of his own MPs and party activists is inevitable. No one has yet been able to tell if he has the stomach for this fight.

All that said, however, the one issue that is virtually guaranteed to split Labour and that could provoke a real leadership crisis is Iraq. No one believes that military intervention is likely before the Autumn, but Mr Blair should be in no doubt that his backbenchers will need some very convincing evidence to persuade them that Iraq represents a threat to Britain if they are to back him. The idea of Mr Blair being out by Christmas is still laughable; but the past few weeks suggest that British politics is entering a more unpredictable and capricious phase.