Downing Street: We're Shit and We Know We Are

This is Simon Walters' Exclusive story in tomorrow's Mail on Sunday. It's a leaked Downing Street Memo which shows just how bad the inflighting within New Labour is. It ends with the words "This is really s*** or bust time".

"LABOUR has no chance of winning the next Election because voters think the Government is a shambles – and there is little Gordon Brown can do to stop David Cameron becoming Prime Minister. That is the devastating verdict of a secret Downing Street memo drawn up for Tony Blair by his senior advisers and obtained by the Mail on Sunday. The confidential document states:

*Labour’s standing is so low that the party’s only hope of recovering may be to abandon Mr Brown and ‘move to a new generation’ by picking a much younger new leader – though it warns of the perils of being ‘disloyal’ to the ‘greatly respected’ Chancellor.
*The public believes the party is riven by ‘internal conflicts’ and shows a ‘lack of grip and competence on key issues’ such as Iraq, the NHS and immigration.
*People who voted Labour at the last Election ‘are moving across’ to the Conservatives and Labour is floundering ‘on every major issue’.
*Mr Blair faces a ‘s*** or bust’ decision on how to stop the rot.

The leak came as a vicious new war of words flared between the rival Blair and Brown camps over where blame for the cash-for-peerages scandal lies. Mr Brown angrily accused Mr Blair’s chief fundraiser Lord Levy of trying to ‘smear’ him over claims the Chancellor did not tell the truth about nominating two of his cronies for peerages. And Mr Blair’s allies responded by claiming the Prime Minister believed Mr Brown had ‘fanned the flames’ of the row over party funding to bring down his Downing Street neighbour. ‘It is outrageous for Brown to play the innocent,’ said one. ‘No one demanded more money than him – and he knew where it was coming from.’

The Mail on Sunday has also learned that Mr Blair has held secret talks with his chief of staff Jonathan Powell, at which they agreed that the Prime Minister’s final six months in office must create a ‘leadership legacy’ which sets him apart from Mr Brown. The Prime Minister has privately mocked Mr Brown’s prospects as Prime Minister, saying: ‘The trouble with many of Gordon’s ideas is that they butter no parsnips.’

The memo, written in the past few weeks, is the most damaging Government leak in years. It was written by one of the Prime Minister’s closest advisers and seen by a handful of senior figures, including Mr Blair. It makes a nonsense of public claims by Labour that Mr Blair is planning a smooth transition to Mr Brown next June or July as part of a carefully co-ordinated strategy to secure a fourth successive Election victory.

It also flatly contradicts Mr Blair’s public statements dismissing Mr Cameron as a lightweight with no chance of winning power. In private, Mr Blair’s inner circle is in a blind panic over the march of Mr Cameron’s Conservatives, and they don’t think Mr Brown is any match for him. The memo freely acknowledges Tory gains in the polls since Mr Cameron replaced Michael Howard, with big leads on tax, crime and immigration.

‘Labour no longer has a measurable lead on any major issue,’ it states. And it confirms Opposition claims that the Government has failed to live up to its promises and that it is haemorrhaging support as a result of the Iraq War. ‘The Government is seen as a shambles. It is not just Labour internal conflicts but a lack of grip and competence on key issues. Iraq is a potent and raw issue, so is the NHS, immigration and crime. We have lost control of the big issues and are not delivering,’ the memo states.

Nor is the trend likely to change. ‘This view is deeply held and entering the bones of the electorate. The public are clearly preparing to shift to the Conservatives if they prove themselves credible and likable. It would be totally wrong to assume this is some kind of mid-term setback. It is not. It is a long-term cyclical shift towards an increasingly acceptable Opposition. People who voted Labour in 2005 are on their way across.’

Mr Blair’s advisers believe Mr Brown’s position as Labour heir apparent is making things worse. ‘Compounding this is an erosion in Gordon Brown’s position against David Cameron,’ the memo says. Extraordinarily, the document reveals that No10 actively contemplated dumping Mr Brown in favour of a younger successor. ‘We can rally round...or we can go for total renewal, moving to a new generation, effectively forming a new government while still in power.’ It does not name the potential alternative successors, but it is no secret that Mr Blair once hoped Environment Secretary David Miliband would mount a challenge against Mr Brown. Similarly, despite being slightly older than Mr Brown, Education Secretary Alan Johnson, a relative Cabinet newcomer, was also seen as a way of providing a ‘break with the past’.

But the memo warns this tactic could backfire: ‘Trying to completely renew in office may look as if we are trying to cheat time. And worse – that we are disavowing our record in government. Gordon Brown is part of our record. If we disown him, we run the risk of disowning our record. The public will recoil from evidence of disloyalty towards Gordon. ‘Whatever people think of him as a [potential] Prime Minister, they still greatly respect him as a Chancellor.’

But it shows Mr Blair has serious doubts about allowing Mr Brown to take over without a leadership contest. The public are ‘not stupid’, says the memo. ‘They will not forgive us if we foist an unpopular leader on them without a proper democratic process. They just won’t accept it.’

It finishes on a note of desperation. ‘We have to focus. We can’t sort out everything. The NHS is probably the best place to start. If we can make sense of one or two areas of policy the rest might fall into place. This is really s*** or bust time.’"

Well if that doesn't lead this evening's news bulletins, I'm a Dutchman. "In ander nieuws vanavond.."

I'll be doing the paper review at 11.45pm on News 24. Glad there'll be something to talk about!