Campbell rebuffs Brown as Milburn returns to centre stage

Election speculation mounts with Prime Minister 'intensively courting' Blair's spin doctor, while another former New Labour foe agrees to pilot White Paper on social mobility

Gordon Brown is battling to give Alastair Campbell a peerage to complete a line-up of New Labour big-hitters in time for an election campaign.

But the former spin doctor to Tony Blair is understood not to be interested in a seat in the House of Lords, despite "intensive courtship" by the Prime Minister since October, The Independent on Sunday has learnt.

The revelation came as Alan Milburn, a one-time sworn enemy of Mr Brown, was welcomed into the premier's big tent with a central role on social mobility and access to the Downing Street nerve centre.

Mr Milburn's shock return to Mr Brown's side after years of bitterness between the two men follows the recall of Peter Mandelson, another Blairite critic of the Prime Minister, three months ago.

Mr Campbell, for some a controversial figure from the Blair years, has been under pressure to accept a peerage and a ministerial job since Lord Mandelson's return.

He has been helping in an advisory capacity but the Prime Minister wants his role formalised, possibly with a job at the Cabinet Office. Giving him a Lords seat and a job would bind him into an official role.

In what will be seen as a snub to Mr Brown, Mr Campbell has so far refused, although strenuous efforts are continuing to get him to change his mind. It is also a rebuff to House of Lords reform initiated under Tony Blair.

The behind-the-scenes manoeuvres will reignite speculation that a general election could be called as early as this spring, despite claims by Mr Brown last week that it was the "last thing" on his mind.

While the date is still likely to be 2010, insiders said the Prime Minister was ensuring "all the pieces are falling into place" to have the strongest team possible to fight for a fourth Labour term. Other names tipped for return include David Blunkett and Charles Clarke, who recently declared his support for Mr Brown after years of animosity.

At the same time, David Cameron readied his party for an early election with a letter to all candidates putting them on a war footing. The Tories are also planning direct mailshots to target seats and a nationwide advertising campaign, while the leader will carry out a major shadow cabinet reshuffle – likely to be the final line-up for polling day – within a fortnight.

He has appointed the businessman Stanley Fink as party co-treasurer in charge of raising the general election fighting fund. Mr Fink donated £1m, and Tory sources said there would be more to come before the election.

Mr Milburn will chair a panel overseeing the White Paper on social mobility – aimed at getting more people from deprived backgrounds into employment in the professions and widening the middle class – which will be published on Tuesday.

As Health Secretary in 2002, Mr Milburn had a spectacular falling-out with the then Chancellor over foundation hospitals. He left the Cabinet in 2003 to spend more time with his family, but returned to help run Labour's 2005 election campaign, when he again clashed with Mr Brown.

Mr Milburn saw the Prime Minister around the time of the Crewe by-election in May and suggested he should produce a White Paper on social mobility. Mr Milburn then helped to write the Prime Minister's speech on the issue in June. The two men began "playing footsie" over the summer, despite speculation that Mr Milburn was urging David Miliband to challenge for the leadership.

The MP has told friends he now believes Mr Brown is "back on the pitch" and that he himself is prepared to "forget the battles of last year".

Mr Milburn will have a secretariat based in the Cabinet Office, but he is expected to have access to Mr Brown's "war room", the horseshoe-shaped desk arrangement inside No 12 Downing Street.

A No 10 source said: "Social mobility is something that Alan Milburn has always taken a very close interest in. This is an issue that Gordon has been talking about for some time. They were quite keen to find a way of working together."

Despite being Mr Blair's long-term spin doctor, Mr Campbell, unlike Lord Mandelson and Mr Milburn, has never been an enemy of Mr Brown, instead seeing himself as "tribally" Labour. He is not known for his support of the Upper House, however, and has said in the past he cannot see himself in the Lords.

Mr Campbell declined to comment last night.

A Downing Street spokesman said: "You wouldn't expect us to comment on appointments or peerages."