The battle for Labour's soul

Alastair Campbell and by extension his master, Tony Blair, may be claiming vindication in their row with the BBC over claims of "sexing up" intelligence documents, but any celebrations are likely to be short-lived.

The war on Iraq has crystallised feelings inside the Labour Party as no other. While the pre-war Labour rebellion may have been contained, post-war peace will prove desperately elusive, just as it is now proving in Baghdad.

Hackneyed commentary on who "is up" and who "is down" in the Westminster village ignores at its peril the breadth and seriousness of the battle that is now being joined for Labour's badly bruised soul. Just as Hugh Gaitskell promised to "fight, fight and fight again for the party I love" at the height of the Bevanite insurrection, so today a new coalition of freshly elected union leaders, dissenting former Cabinet Ministers and some of the more opportunistic that remain, is preparing to do the same.

The starting pistol was fired over the weekend as more than 400 weather activists gathered in central London for a "Save our Party" conference. On parade were many of those who have laboured under the label "the usual suspects". They were joined for the first time by a new "awkward squad"; general secretaries from Britain's biggest unions - also Labour's largest affiliates - all of whom have moved sharply to the Left in recent months.

The message from Tony Woodley, the new leader of the Transport and General Workers' Union, and Derek Simpson, the softly spoken surprise victor of a seismic battle within what had hitherto been the most compliant of unions, Amicus, was tough and uncompromising. It was: "So far and no further". Harold Wilson once opined that the "Labour Party is a moral crusade, or it is nothing". As party members fade away, and some unions threaten to walk away altogether, the storm clouds are gathering.

It is a battle that will inevitably focus on Tony Blair's leadership, a focus on style to be sure, but more importantly now, on content. It may be churlish of Labour's foot soldiers to show anything but gratitude to the man who helped make two full terms in office a reality. But the party - and the unions especially - have had enough. The shortish list of pro-union policies, the minimum wage and limited recognition rights at work, were all fought for in the teeth of opposition from Mr Blair and his entourage. What is more, they all came in Labour's first term. A second term, with all the promise of radicalism as the City was finally assured of New Labour's economic competence, has proved a chimera. A third term, without any roadmap, begins even to look problematic.

Today Tony Blair is in trouble. Even some of his most tribal of supporters never expected Third Way radicalism to become an extension of Lady Thatcher's shopping list. A powerful coalition that now runs all the way to the top of the Labour Party will focus on three key issues in time for Labour's autumn conference - Gordon Brown's fixation with the Private Finance Initiative, the widely disliked Foundation Hospitals initiative, and Iraq. Joining the "usual suspects" and the "awkward squad" on each of these lightning conductor issues will be respected senior figures such as Frank Dobson, Chris Smith, Michael Meacher - and of course the guided missile that is Robin Cook.

What the Prime Minister may not appreciate is that many of those who enthusiastically clambered aboard the New Labour train are just as capable of reverting to form. Others, such as Peter Hain, have not entirely lost that ability to play to the Labour gallery - as he did recently when he urged increased taxes for the rich before being slapped down.

Almost unnoticed, another former firebrand of the Left, Patricia Hewitt, apparently led a spirited opposition to the war on Iraq within the Cabinet, so it came as no surprise that she was one of the first to revolt against political "Newspeak" and argue in favour of plain political English prose again.

All around the restraints are being loosened. How long can it be before yet another former firebrand, the now resigned Health Secretary, Alan Milburn, re-discovers some of his lost radicalism, following in the wake of his old friend, Stephen Byers, who has recently come out against the excesses of the free market?

The biggest beast in the jungle remains Gordon Brown. Although an architect of New Labour, Brown has not only maintained a healthy relationship with the broader party - because he understands it and likes it - he has been the bringer of good news in the shape of more public spending and a much downplayed, albeit limited, re-distribution.

Brown has a rare ability to be able to speak to the Institute of Directors one day and the TUC the next. His adroit balancing act on the euro has the entrenched supporters of either side believing that he is with them. In the hardening school of Labour politics, Brown could yet find himself outflanked from the Left if those such as Hewitt or Milburn re-invent themselves again.

As night follows day, Tony Blair's leadership is an issue, because of the edifice that he has built around himself. "New" Labour as an electoral device and machine was a creature of its time. By necessity it was tightly organised because it was a political project that ran counter to a hundred years of Labour social democracy and socialism. In practice, Tony Blair's New Labour encouraged the cult of the leader - hardly surprising perhaps, as so many of its most enthusiastic supporters spent their early years learning bad habits in far-Left sects. But with growing public disillusionment with the top down, over-spun politics of the Blairite technocrats now running rife, the cork is being forced out of the bottle.

Blair himself appeared to acknowledge that recently as he cavilled at his Government's obsession with "targets".

This weekend's opening shots herald a noisy autumn, but also the beginning of much heavyweight negotiation and bargaining behind the scenes. The unions, with several million members, can claim to be the bedrock of traditional Labour support in the electorate. Collectively they still wield considerable power within the party, and all the signs are that they now intend to use it. Whether Tony Blair and New Labour are capable of the sort of balancing act that Harold Wilson knew by rote is an altogether different matter. This time around, Labour's future will not be decided by the media, the focus groups or the spin-doctors.