Brown's assault by stealth

Chancellor sets out credo with coded attack on Blair

An attempt by Labour to put on a show of unity at its party conference was undermined last night by a new outbreak of hostilities between allies of Tony Blair and Gordon Brown.

In a warmly received speech to the Brighton conference, the Chancellor pledged his full support to the Prime Minister over the Iraq hostage crisis but staked out an alternative vision of what Britain might look like under a Brown premiership.

He also made clear that he would play a leading role in deciding the programme for a third Labour term despite the appointment of his ultra-Blairite rival Alan Milburn as the party's policy and election co-ordinator.

Today Mr Blair will answer Mr Brown's call for Labour to build a "progressive consensus" in Britain with his own "big idea" - pledging a "fundamental redistribution of opportunity" to the most disadvantaged people. In his keynote conference speech, Mr Blair will make a plea for pre-election unity and say that he wants a third term not so that he can retain personal power but to create a society based on "ambition, aspiration and opportunity for all", aides said last night.

Although he applauded Mr Brown's speech, the Prime Minister will risk reopening tensions with the Chancellor by stressing his determination to see through the radical new policies that will be included in the Labour manifesto.

That will be seen as a sign of his intention to serve a full third term in Downing Street - a move which would again frustrate Mr Brown's ambitions to succeed him.

A close ally of Mr Blair said: "He will set out our offer to the people on which we seek a further term. It will be an agenda for an entire third term, and one he intends to implement." The Prime Minister is expected to try to heal his party's wounds over the Iraq war by admitting that mistakes were made in the approach to the conflict. But he will refuse to apologise for ousting Saddam Hussein.

Within an hour of a public handshake between Mr Blair and Mr Brown after the Chancellor's speech, tensions between their rival camps had resurfaced. Brownites accused Mr Milburn of stirring divisions after the former health secretary told a Brighton fringe meeting: "In an atmosphere of greater cynicism and frankly more distrust, simply screaming louder and louder about our achievements in the past is not necessarily the way to get through to the public."

That was seen as a coded criticism of the Chancellor, who insists that Labour must campaign on its economic record since 1997. He told the conference yesterday that all elections were fought on the economy. The Blair camp is keen to flag up a series of radical reforms and believes that Labour's 2001 election campaign, overseen by Mr Brown, was too cautious and did not provide enough momentum for the party's second term.

Mr Milburn denied fomenting divisions and told another fringe meeting last night: "We must fight the election both by celebrating our achievements and by setting out our future offer to the country." He praised Mr Brown's running of the economy.

In his conference speech, Mr Brown took a sideswipe at Mr Milburn by declaring that the NHS was about more than "contracts" - a reference to the Blair ally's support for more "choice" in public services. Aides of Mr Milburn replied that he wanted choice not based on markets but choice that could be handed to people who could not afford to exercise it at present.

Brownites insisted that the Chancellor's speech was "unifying, not divisive" but admitted privately that it was also designed to show that he would not be marginalised following Mr Milburn's appointment.

Mr Brown trumpeted Labour's success in retaining the trust of the voters to run the economy. His supporters contrasted that with Mr Blair's loss of trust over Iraq. Charlie Whelan, the Chancellor's former press secretary, said trust was "not a word that Tony Blair can use in his speech". He added: "Don't forget that Tony Blair ditched him [Mr Brown] from running the election campaign. He wants to be able to say, 'Hang on a minute, what really matters in an election campaign is the economy ... I have delivered a strong economy. You can't ignore me'."

Ed Balls, until recently Mr Brown's closest Treasury aide, told The Independent's fringe meeting: "We need to be united as a party and give the impression that there is no argument and division. We are all united in our desire to have a radical and transformatory third term ... It is essential that we have a Cabinet that is united going into our third term."

BETWEEN THE LINES

* What he said: "We can build a shared sense of national purpose, and a progressive consensus that inspires."

* What he meant: We must not rush with more headline-grabbing "radical" reforms for the sake of "boldness". A warning, Tony, over the party's direction.

* What he said: "From being the party not trusted with the economy ... Labour is the only party trusted with the economy."

* What he meant: I have delivered economic stability without which Labour would be behind in the polls. I am trusted, Tony, you are not.

* What he said: "With the economy central to people's concerns ... that is the way to entrench and retain the trust of the people on the economy and to pay for reforms."

* What he meant: As Bill Clinton said, "It's the economy, stupid" that decides elections. So it is madness not to give me the key election role.

* What he said: "I have seen this ethic of public service... there are values far beyond those of contracts, markets and exchange."

* What he meant: We can extend "choice" in public services but should win public support. Listening, Alan Milburn?

* What he said: "If we can create a programme... that says it is by prosperity and justice by which the British want to be defined... then what a difference our country can make in the world."

* What he meant: We can be a centre-left beacon, not a US poodle.