Battle for survival at No 10: Mandelson key to defeat of rebels

Business Secretary repays 15-year debt as he orchestrates the fightback, with Tony Blair also riding to the rescue. Brian Brady and Jane Merrick report

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Three days ago, James Purnell cut a lonely figure, fighting a losing battle supporting Labour's European Elections campaign in Hyde town centre, Cheshire, in the final hours of polling day.

Exactly a month after he had joined the Prime Minister to launch Labour's campaign for the European and county council elections, Mr Purnell was in Market Place, in the midst of a gaggle of activists handing red balloons to passing children. He did not appear wildly enthusiastic about his task.

"It went through my mind that he looked rather pre-occupied at the time and, it has to be said, a bit of a sorry figure," one onlooker recalled. "The only person I actually saw him communicate with while I was queuing was a little girl who had been given a balloon."

The isolation might well have been a learning experience for a politician who was about to quit the Government. Today, Mr Purnell finds himself out of the Cabinet and isolated, condemned by Labour colleagues, nationally and locally alike. And the Prime Minister whom he urged to follow him out of the door is still, somehow, clinging to power.

As drizzle dampened Britain yesterday, the warm weather and blue skies of a week ago must have seemed a distant memory to those who hoped they would have Gordon Brown out of Downing Street by today. So how is it, amid this extraordinary psychological drama, that Mr Brown is still there? Only last Sunday, hours after he appeared on the BBC to try to "relaunch" his premiership, Hazel Blears and other politicians joined Westminster journalists for broadcaster Andrew Neil's 60th birthday party at his home in Fulham. As temperatures reached the mid-20s, the Communities Secretary chatted in the sunshine to Charles Clarke, among others. Their conversation caused some to suspect they were plotting, but they were too shrewd to choose such a public place to discuss the leadership, so they kept it light.

But privately, Ms Blears remained deeply unhappy at the way Mr Brown had described her expenses claims as "totally unacceptable" whereas others in the Cabinet – namely Alistair Darling and Geoff Hoon – had appeared to get away with theirs. Ms Blears and Mr Clarke are likely both to have been mulling over morning reports of a reshuffle "leak" from Downing Street, declaring that Mr Brown wanted Ed Balls to be Chancellor.

In fact, to many this was hardly news – Mr Brown has wanted his close ally to be his Chancellor for more than a decade. But the story focused the minds of rebels. A Chancellor Balls, a divisive figure for dozens of Labour MPs, would confirm their concerns that the Prime Minister was retreating further into his bunker and had no interest in rescuing Labour from a crushing defeat in 2010.

On Sunday evening, it emerged that The Daily Telegraph had a new story on Alistair Darling, which led on his expenses claim for two homes at once. Mr Darling's aides insisted there was no wrongdoing. On Monday morning, Mr Brown went on the Today programme to defend his Chancellor, but then Mr Darling repaid some of the money, and at the No 10 lobby briefing at 11am it seemed as if Downing Street had been caught out. By the afternoon, Mr Darling looked as if he would be forced to walk the plank, as a briefing operation against him gathered steam. The Chancellor appeared to accept he would have to leave the Treasury, but let it be known that he would rather quit the Cabinet altogether rather than accept another job.

Ms Blears took a different view: to her mind, a fellow Cabinet minister had become embroiled in the expenses scandal and apparently been let off the hook. While she expected to be sacked outright, here was Mr Darling, at first backed by the Prime Minister over his expenses, now in apparent negotiation for another top job. On Monday, thoughts of resignation began to crystallise in her mind. In the evening, friends say, she "bumped into" a couple of female colleagues, Caroline Flint and Jacqui Smith, in a Commons corridor. They were spotted by a Brownite minister, who fed the information back to his colleagues.

Two days later, in coverage of Ms Blears's resignation, the women's meeting had metamorphosed into a "Pugin Room Plot" of female ministers out to get the Prime Minister. No 10 figures were blamed for the "black ops" briefing that led to this description. A friend insisted the three women meet often for drinks, and this night was no different. Another who has been a victim of the No 10 briefing machine said: "It is like Damian McBride never left."

On Tuesday, Ms Blears led what would be her last Commons Questions. She met the Prime Minister afterwards for a private meeting. The Cabinet minister didn't raise the threat of resignation, but she made clear her continuing unhappiness at his "totally unacceptable" remark.

As the two held talks, events were unfolding at Westminster that hinted at the turbulence of the week to come. There were also signs that, despite protestations from friends of Ms Blears, a plot was afoot. At 9.10am, Patricia Hewitt, no ally of Mr Brown, announced she was stepping down from Parliament at the next election because of her elderly parents. At 9.29am, David Chaytor, who claimed for a "phantom mortgage", followed suit. And at 10.56am, Children's minister Beverley Hughes said she would quit the Government in the coming reshuffle.

Then, at 12.56pm, the most dramatic news of the day emerged: Jacqui Smith was the first cabinet minister of the week to depart. The Home Secretary had told the Prime Minister in early May that she wanted to step down for "family reasons" after pressure over her expenses – including her husband's claim for two porn films. Incredibly, this news had not leaked out until now.

But Ms Smith's departure, which was supposed to be at the reshuffle days later, was cloaked in the sort of briefings and counter-briefings from both the Prime Minister's allies and the rebel camp which came to characterise the week.

Allies of Brown accused "friends of Hazel" of telephoning the Birmingham Mail, which covers Ms Smith's Redditch constituency, with the leak of her resignation in an attempt to destabilise the PM. Ms Blears was furious at this suggestion and has categorically denied it. An ally said: "Why would she want to damage her friend?"

Within hours, four Labour MPs – Ian Gibson, Margaret Moran, Elliot Morley and Mr Chaytor – had been told by a "star chamber" panel of the party's ruling National Executive Council that they would be barred from standing at the next election because of their expenses claims. For Mr Gibson, who accused Labour of running a "kangaroo court", the ruling was particularly wounding because his case was less than clear cut. Later that week, he would exact revenge by standing down immediately from his Norwich North seat, forgoing his £60,000-plus golden parachute paid out to retiring MPs at general elections, and triggering a by-election.

As Westminster baked in the heat of the early summer and a rumour-mill in overdrive, one Cabinet minister was away from the action. Ed Miliband's partner, Justine Thornton, was giving birth to their first child, a boy weighing 7lb, at an NHS hospital in London. The Energy Secretary, who is clean in expenses terms, is a strong candidate for the Labour leadership, whenever it comes. His Tory shadow, Greg Clark, joked that Mr Miliband's sudden paternity leave was the equivalent of John Major's toothache when Margaret Thatcher's premiership was crumbling.

On Tuesday evening, Ms Blears was at home when she made the decision to quit. Her friends maintain there was no plot, although the circumstantial evidence is strong.

A friend said: "There was a growing sense that she would be sacked. She does regret the fact that she had to go before the elections, but believes she has little choice. It was building up to be a high-profile sacking. She has been the scapegoat."

On Wednesday morning, Ms Blears got up early, having instructed her staff to be in by 8am. As she got dressed, she pinned a brooch to her lapel. Friends say she did not consciously notice it featured the words "rocking the boat" which would become the accessory equivalent of two fingers up to the Prime Minister, in oxidised silver and fine gold.

In her office in the department on Victoria Street, she put her name to a resignation statement and instructed her private office to request an urgent meeting with Mr Brown. She arrived at 9.45am through the back door of Downing Street and told the PM of her decision, handing over the letter which was short on niceties and praise for the Prime Minister. After saying goodbye to staff in her department, some of whom were in tears, she took a train from Euston to her Salford constituency.

For those in Downing Street, her resignation two hours before PMQs was an act of treachery. One aide brought up the "Women Against Gordon" – Ms Blears, Caroline Flint and Ms Smith – and the so-called "Pugin Room plot".

In No 10, as in offices and corridors in the Palace of Westminster, the question "Who's next?" was asked repeatedly. While Mr Brown prepared for Prime Minister's Questions, an operation got under way to ensure Ms Flint did not resign and cause a potentially fatal domino effect that would topple the Prime Minister before tea-time.

James Purnell was not considered to be a problem. Fellow cabinet ministers spoke earlier in the week of how the Work and Pensions Secretary had joined them in "hosing down" colleagues who showed signs of wavering in their support for the Prime Minister. "He was one of the main people urging everyone to stick with Gordon," one said. "It was assumed he'd been boxed-off and didn't need anyone to work on him."

Mr Purnell actually arrived late for Mr Brown's public examination in the Commons chamber on Wednesday lunchtime. But another latecomer, Brown trusty Douglas Alexander, reported that he joined in lustily and added his voice to the Labour MPs desperately attempting to bolster the Prime Minister with exaggerated cheers.

But 24 hours later, he was in his constituency preparing to quit. Friends say there was no single event of the week that pushed him, rather that he had been considering his position for some time. So the PMQs performance was just an act.

At 6pm that evening, the political editors of three national newspapers were informed that the Cabinet minister was ready to make "a significant announcement". The letter was swiftly transmitted – before many of his colleagues back in Downing Street had been informed of his decision. The only constraint Mr Purnell imposed on his bombshell was the instruction that it should not be made public before the polls closed at 10pm. It was, the departing minister's rivals subsequently maintained, his last significant act of loyalty to his leader. He informed his close friend David Miliband around 7pm.

The Prime Minister's discomfort at the end of a difficult polling day was expected to peak with a scheduled attack from Labour MP Barry Sheerman. Earlier in the day, the chairman of the Children, Schools & Families Select Committee had let it be known that he would be calling for Labour MPs to be given a secret ballot on whether Mr Brown should stay as leader. The Brown camp had been content for a low-level line-up of trusties, including Frank Dobson and Ken Livingstone, to go public to bat away the irritant on their behalf. However, behind the scenes, they were at work trying to undermine the attack.

No matter. Sheerman's assault barely survived the opening credits of the news bulletins. The Purnell bombshell swiftly propelled the Prime Minister's allies into a full-scale emergency for which they were totally unprepared.

As Lord Mandelson, Mr Brown and others were gathered in the No10 "war room" shortly before 10pm, the news of Mr Purnell's bombshell broke. His letter arrived in an email at 9.53pm. The Downing Street switchboard put through a call from Mr Purnell to the Prime Minister. Mr Brown was shocked, and handed the phone to Lord Mandelson, who had arrived in Downing Street only minutes before. As Lord Mandelson spoke to his old friend, the news was breaking on Sky and BBC news channels. The peer was "shocked and upset" at the news. "He was quite upset about it," said a friend. "They are old friends, but he was also upset for James and because he was leaving for the wrong reasons.

"It is no secret what high regard Peter has for James." Lord Mandelson, in an interview with The Times yesterday, said he once had high leadership ambitions for Mr Purnell –making clear those ambitions were now finished.

Liam Byrne, the Cabinet Office minister rostered as the front-man to take the pain of the "clip round the ear" expected from the election results, gamely dealt with the fall-out from the departing minister's letter, which had suddenly monopolised the agenda. But, for an uncomfortable two hours, no-one of any seniority went before the cameras to back the PM.

"The wobble came when James went," a No 10 source explained. "The mood changed. It became about how you stabilise things."

Stability initially meant Brownites, fearing a lethal coup, cajoling Cabinet ministers into immediately declaring their loyalty to the PM. Lord Mandelson led the efforts, frantically calling a series of Cabinet colleagues to demand their support – and a pledge to hit the airwaves to declare it publicly. By 1am it was becoming clear that no other minister would quit with a call for Mr Brown to go – although John Hutton would resign the next morning, he failed to criticise the Prime Minister.

At the same time, Hazel Blears, watching the TV at home, sent an encouraging text message to another modernising Cabinet minister thought to have sympathies with the cause. But the minister was also called by Lord Mandelson, and had no intention of rebelling. The message from Downing Street was clear: a new leader will mean a general election dominated by the expenses scandal, and Labour will have no hope. Compelled by self-interest, the Blairite ministers left their friend dangling.

It was, however, not until after midnight that the first significant votes of confidence in the Prime Minister were heard: from David Miliband, from John Hutton, Andy Burnham, Jack Straw, Geoff Hoon – and Caroline Flint, who declared herself "very proud to be part of Gordon Brown's Government" in a pre-recorded interview broadcast at 10pm.

Another figure close to the rebels was furious at the failure of ministers such as Mr Burnham, David Miliband and Mr Hutton to follow suit. "At the end of the day, all politicians care about is themselves. It is all about saving themselves, not saving the party."

The Labour machine had effectively stamped on any palace coup. James Purnell was one of a tight band of young ministers who had come up together through the New Labour aristocracy. But when he finally walked the plank, he found no-one was following him over the edge.

The furore was also a shattering blow for members of Mr Purnell's constituency party. Mr Purnell had, they complained, "disappeared" at the end of campaigning and the next they heard from him was when news of his move against the PM detonated four hours later. When the MP did resurface, with a call to his local party chief early the next morning, he was not welcomed back into the fold. "I was extremely disappointed that he didn't have the bottle to come and tell us himself," said Councillor Kevin Welsh, chief whip of Tameside Labour Party and chair of Stalybridge district assembly. "I was staggered, incandescent with rage. I feel it's ill-judged, self-indulgent and he has made a massive mistake."

It remains unclear what Mr Purnell's motives were – whether he acted on principle or out of self-interest, whether he was a lone gunman or the first shot of a Blairite rebellion. Friends insist that he acted for the good of the party. Detractors prefer the allegation, at least encouraged by some in the Brown hierarchy, that the change of heart was precipitated by his anger at potentially being shifted to accommodate Ed Balls.

A Purnell ally protested last night. "James was motivated by an accumulation of things. He had been considering his position for a long time."

The attempted coup faltered, and possibly will fail this time, because, in a cruel twist, the man in whose name Mr Purnell was acting, his master of nearly two decades, would not support it. Not only could he not be seen to be supporting it, but he would not, and in fact believes the Prime Minister should remain where he is.

Mr Purnell had not told Mr Blair of his intentions, because he knew he would be dissuaded. Crucially, Mr Blair, who himself hated Cabinet reshuffles, telephoned Mr Brown during the day on Thursday to offer encouragement for the election results.

The PM thanked his predecessor. The call was a welcome relief after the dozens of others Mr Brown had made to MPs over the previous 24 hours.

While it is no secret that Mr Blair has been critical of Mr Brown's style, the former PM had also been the victim of an attempted coup. It did not matter that Mr Brown's closest allies were behind that strike in September 2006. Mr Blair is a supporter of the office of the Prime Minister. While he would have liked Mr Purnell to inherit the crown one day, this revolutionary act went against the grain for Mr Blair. And he is not a fan of Alan Johnson, the likely beneficiary of a coup.

That Mr Blair is interested in becoming President of Europe, and had secured support from Mr Brown two weeks earlier, would have only helped the case to keep Mr Brown in power. A messy coup, toppling Mr Brown, would have meant the new leader forced to call an early election, probably in the autumn. As Lord Mandelson telephoned any Blairite would-be "jumpers" late on Thursday evening, it was also made clear that Mr Purnell's actions were not supported by Mr Blair. The irony is that, while he signally failed to force the PM to heed his advice to stand down, Mr Purnell's actions effectively prevented the wide-ranging shake-up that would have installed Mr Balls at the Treasury and beefed up Lord Mandelson's role, creating a powerful "troika" at the top of government.

The precise date of the reorganisation had been moved repeatedly in the past month, and the latest proposal had been to delay it until Monday, as a grand gesture in response to the expected election mauling. But, in the early hours of Friday, it was decided that the move offered Mr Brown the best chance to seize the initiative, and to head off rebellion by binding potentially troublesome ministers to him.

However, as the desire for stability took over, Mr Brown's reshuffle was radically scaled down. "The seismic option just went off the agenda," a senior Government source said. "Ed told Gordon: 'Whatever you do is all right with me."

Shortly after dawn on Friday, the Prime Minister called Mr Darling to confirm that he would be staying put.

Yet the single most significant appointment of the reshuffle was the most political of all. The need to accommodate Mr Johnson had overtaken any other reshuffle requirement. The Health Secretary was already on the train back to his Hull constituency when he took the call offering promotion. By late afternoon, the new Home Secretary was back in London, posing for interviews outside his department.

The reshuffle itself was hurriedly convened in the Cabinet Room, with Mr Brown, Lord Mandelson, Sue Nye and Jeremy Heywood, Permanent Secretary at No 10. Insiders report that, at one point, Mr Blair's spin-doctor, Alastair Campbell, was on the phone offering advice to Lord Mandelson.

The new Cabinet took shape throughout the day on a whiteboard with metallic slides, on which were written the names of all potential participants. The biggest wobble came with the announcement that Defence Secretary John Hutton would be leaving the Government "for family reasons". Mr Brown maintained that the decision had been flagged months in advance, and the avowedly Blairite Mr Hutton reinforced the show of harmony by supporting the PM.

Mr Brown ultimately replaced six Cabinet ministers, in the "calm" reshuffle confirmed at a press conference shortly before 5pm on Friday. After a week in which his fortunes swung wildly, Mr Brown believes he can show he is the right man for the job and head off perennial talk of a challenge going into September's Labour conference.

However, Downing Street's growing sense that he had got away with it, and emerged from the crisis stronger than before, lasted barely 15 minutes. As the PM was rehearsing the tired insistence that he would fight on, watching journalists began to receive news that Ms Flint had resigned after failing to win a right to attend Cabinet. Worse, the former Europe minister had signed off with a devastating attack on Mr Brown's leadership style.

One Cabinet aide said she had "prostrated herself" in pictures for The Observer and it was a "bit rich" for her to now claim she was being described as "female window dressing".

It has been a week in which the political careers of ministers and ex-ministers from all sections of the party have been damaged for good. After a buoyant start to the week, Mr Ed Balls' leadership prospects are severely dented. He remains in the same job, in a marginally enhanced department, with his erstwhile enemy Peter Mandelson anointed the de facto deputy PM.

The horrified reaction to suggestions that he could take over the Treasury confirm that, to many in the Parliamentary Labour Party, he remains a divisive, toxic figure.

Mr Brown has now been plunged into a battle for the heart of the Labour Party. At 7pm on Monday in the Boothroyd Room in Portcullis House, Ms Flint will join Stephen Byers, one of the ringleaders of the rebels, for a debate on the party's future organised by think-tank Progress, the spiritual home of the Blairites. It will follow a meeting of the PLP along the same committee corridor in the Palace of Westminster where Margaret Thatcher's fate was decided in a vote 19 years ago.

There are signs that, whatever happens to Mr Brown, Labour faces a civil war. MPs are openly attacking each other, with Blairites turning on each other. By last night, a growing number of backbenchers had said they would back a letter calling on him to go, but colleagues have been vitriolic about the "self-indulgent" plot. Labour MPs might see no future with Brown in charge, but a new leader would demand a General Election – and, based on the party's present position, that would mean oblivion for scores of them.

In a world where ministers and MPs see their own futures bound up with the fate of their party, dissatisfaction with the Prime Minister did not disappear when James Purnell went overboard.

Westminster week in numbers

24 The number of hours between Caroline Flint pledging loyalty to Gordon Brown and her quitting, accusing the PM of sexism.

5 The number of times, within 22 seconds, that Gordon Brown used the word "action" in response to the Scottish National Party's Mike Weir asking when he will call an election.

70,000 The number of computers Alan Sugar's company will be providing to the Government in a £30m contract.

£181.88 The amount Gordon Brown has repaid to the Commons fees office this week, reportedly claimed as an electricity bill for his home in Fife.

4 The number of home secretaries Labour has had in the past three years.

3 County council seats taken by the BNP. They are in Hertfordshire, Leicestershire and Lancashire.

A week in politics like no other

Sunday: 31 May

10.30pm: Gordon Brown's week of turmoil begins with newspaper revelations that the Chancellor, Alistair Darling, had made a "mistake" over his expenses.

Darling is accused of submitting a £1,004 claim for service charges on his south London flat after he had moved out and into No 11 Downing Street.

Monday

8.15am: Brown fends off questions over the Chancellor's position. Darling apologises "unreservedly" and promises to pay back £350 of expenses.

Tuesday

9.10am: The former health minister Patricia Hewitt, right, says she will step down at the next election...

9.29 am: David Chaytor, Labour MP for Bury North, who claimed for a mortgage already repaid, says he will stand down at the next election...

10.56 am: The Children's Minister Beverley Hughes steps down from the Cabinet and announces she will not contest the next election, citing "family circumstances"... 12.56 pm: The Home Secretary Jacqui Smith announces she is to quit her cabinet post but remain in Parliament. She vows to contest her Redditch seat at the next general election...

3.50pm: Cabinet Office Minister Tom Watson announces he will step down from government for "family reasons".

Wednesday

09.45am: The Communities Secretary Hazel Blears resigns to return to her Salford grassroots activism.

Thursday

9.53pm: James Purnell, the Work and Pensions Secretary, becomes the most senior cabinet figure to quit, and calls for Gordon Brown to go.

Friday

10.30am: John Hutton quits as Defence Secretary but pledges loyalty to Brown...

2.55pm: The Secretary of State for Wales Paul Murphy resigns, pledging loyalty to Brown...

3.30pm: The Transport Secretary Geoff Hoon resigns, pledging loyalty to Brown...

4pm: The Labour backbencher Ian Gibson, banned from standing by the party over his expenses claims, resigns from Parliament in order to trigger a damaging by-election... 4.30pm: The Employment Minister Tony McNulty leaves the Government... 5.10pm: Caroline Flint, the Europe Minister, quits, after failing to win the promotion she had been expecting. She accuses Brown of using her as female "window dressing".

Runners and riders: Likely candidates to be Labour's next permanent leader

Alan Johnson

Enhanced his reputation and won promotion into the Cabinet's big league without doing much. Says he supports Gordon Brown and that he has no ambition to be leader – which frightened the Prime Minister into offering him a move from health to the Home Office. Some 35 per cent of Labour members say they'd like him in charge if Mr Brown goes.

Best odds 11/8

Harriet Harman

Surprise winner of the 2007 deputy leadership election, ahead of Johnson, she commands solid support from the Labour grassroots. She is criticised for seeking attention, but her hard work in support of the leadership has been exemplified through repeated media interviews during the difficulties of the past week. Party approval not reflected in support across the electorate at large.

Best odds 13/2

David Miliband

Remains the most likely Blairite candidate, but inactivity when leadership challenge is in the air tries the patience of his supporters. James Purnell's resignation could have cleared the way for a Miliband accession but the Foreign Secretary again stood back and pledged support for Mr Brown. Loyalty may prove valuable to him in the future, but his time as the leading young gun is limited.

Best odds 7/1

Ed Miliband

Quietly coming up on the rails. Long regarded as the more personable Miliband, he is now proving himself a competent cabinet minister and an adept performer in front of the public and the party faithful. Conveniently out of the way last week, after the birth of his first child, although no doubt he would have backed the PM. Needs to establish more of a public profile.

Best odds 10/1

James Purnell

Seen by many as the real "heir to Blair", but sacrificed his prominence among the young guns with his resignation, although the move may prove to his benefit if the Government fails as disastrously as he fears. The "principled" resignation could move him to the head of the Blairite candidates, ahead of his close friend David Miliband – although maintains he has no such ambitions.

Best odds 14/1

Ed Balls

A big loser last week, despite remaining in the Cabinet and being Mr Brown's most trusted adviser. Failure to win chancellorship was a blow, but more damaging was Labour MPs' reaction to the idea of him gaining such a significant role. Has relentlessly courted activists and constituency parties across the country but remains a divisive figure in the parliamentary party.

Best odds 20/1