New twist in rivalry of Blair and Brown

Tension between Prime Minister Tony Blair and Chancellor Gordon Brown flared up again today.

The relationship was thrust into the spotlight again amid reports that Mr Blair almost quit last week.

Westminster insider Jackie Ashley - wife of influential BBC political editor Andrew Marr and a personal friend of several female ministers - claimed Mr Blair "pencilled in" the date as the moment to announce he was stepping down. Ms Ashley, regarded as one of New Labour's "aristocracy", claimed Mr Blair had endured a "rocky few weeks when he was genuinely considering his position".

He is said to have suffered a " crisis of confidence" in the run-up to the local and European elections, and following intense criticism over anarchy in Iraq. He is said to have been talked out of the plan by senior aides, and MPs are now confident he will stay in the job for the foreseeable future.

But new allegations of plotting by No10 against the Treasury today fuelled speculation that his relationship with the Chancellor remains highly fraught. It is claimed Mr Blair's senior aides have been cooking up a plan to set up a new economics unit at No10.

The Prime Minister was said to be considering detailed proposals to set up a new unit to rival the Treasury.

The scheme is said to have been devised by Mr Blair's allies amid mounting frustration over Treasury secrecy.

Today a Downing Street

spokesman furiously denied the allegations. He said: "We do not recognise this in any shape or form. It is complete and utter rubbish from start to finish."

Details of the proposal come just a week after the feud between the rival camps of Mr Blair and Mr Brown was reignited by a controversial new book by Derek Scott, ex-economic adviser to the Prime Minister.

It tells of furious rows between the two men and is critical of the Chancellor.

Downing Street's angry reaction is an indicator of just how sensitive relations are between Mr Blair and Mr Brown. Plans to set up an alternative source of economic advice and policy at No10 would have been interpreted as a clear challenge to Mr Brown's authority.

Last Friday was the official date for the crucial handover of power in Iraq - making it a logical date for Mr Blair to have stepped down.

Mr Blair has been dogged by rumours about his future for the last three months.

Despite repeatedly claiming he "hopes" to lead Labour into a third term in government the Prime Minister has failed to quell speculation that he is tiring of the job. It is the first time that a specific date has been mentioned in connection with his departure.

Mr Blair always made it clear that he was determined to "finish the job" in Iraq. Claims persist that he could still step down, in November.

But the Tories' disappointing performance at the polls gave him a major boost.

The relatively smooth transfer of power in Iraq, and an opinion poll yesterday suggesting that voters still favour him over the Chancellor as leader, have also strengthened his position.