Mandelson and Brown fell out over leadership

Gordon Brown and Peter Mandelson fell out over the Labour leadership election, when the Shadow Chancellor was persuaded to stand down in favour of Tony Blair.

Mr Brown nursed a suspicion that Mr Mandelson, regarded as a Machievellian character by his critics at Westminster, was partly responsible for undermining Mr Brown's own ambitions to become leader. Mr Blair, who was always certain of his own chances of winning the leadership, is now trying to create a rapprochement between the two for the first time in 18 months.

Both Mr Brown and Mr Mandelson are strong supporters of the modernisation of Labour - Mr Mandelson was one of the originators of Labour's drive towards "perestroika" under Neil Kinnock.

Relations are also strained between Mr Mandelson and John Prescott, the deputy leader of the Labour Party. As a key member of Mr Prescott's campaign co-ordinating team, Mr Mandelson attends a weekly meeting with Mr Prescott's close aides Dick Caborn and his Parliamentary Private Secretary, David Hanson, to discuss campaign co-ordination.

But behind the personal strains lies a more fundamental tension over the direction of Labour's policies, particularly over the economy. Robin Cook, the Shadow Foreign Secretary, and Mr Brown are arch rivals over the direction of policy on tax and spending.

It was no surprise when Mr Cook sounded a clear note of dissent after Mr Brown said "tough choices" would have to be taken on child benefit. Mr Cook and several of his Shadow Cabinet colleagues, including Chris Smith, the Shadow Social Security Secretary, and David Blunkett, the Shadow Education Secretary, were alarmed that Mr Brown appeared to be "bouncing" them into policy decisions before a review was completed.

Mr Mandelson, one of the most accomplished advisers on presentation, may also have been surprised by the extent to which Mr Brown was prepared to allow Labour to suffer damage over the threat to child benefit for 16-to-18 year olds in the belief that it would be more than compensated for by the announcement of a flat-rate educational maintenance allowance to encourage young people to stay on at school.

The child benefit row led senior Shadow Cabinet figures to wonder to what extent the Labour leader was using Mr Brown - his closest ally - to push out the envelope of party policy, or whether Mr Brown was setting out a policy, which Mr Blair had to back.