The Chancellor, like the PM, has delivered himself as a hostage to George W Bush

As Saddam Hussein was losing his grip in Baghdad, at Westminster it was time to congratulate the Prime Minister. This was "one of the most brilliantly executed campaigns of recent history", Tony Blair was told. And much of that was down to him. The man bestowing praise was Iain Duncan Smith. The cheers on the Conservative benches were raucous. On the Labour side they were barely audible.

Blair has certainly won over many of his detractors on the right. The phoney man of the focus group has been reinvented as the risk-taker with nerves of steel. But long after the war is finally done and the Americans begin truly to run Iraq, will Blair's crusading zeal spread into domestic affairs, and will his writ extend to the Labour Party?

No sooner had Blair and Duncan Smith sat down than it was the turn of the Chancellor. At the start of the year, Gordon Brown was written off by the Blairite storm troopers. His decision to rally round on the eve of war - when the Prime Minister was at his most vulnerable - was an act of both personal integrity and political calculation. The bond, the intensity of which is hard for outsiders to fathom, was restored.

This seventh Budget was the hardest yet. Brown made a dogged attempt to massage the admission that he had got his calculations wrong again. He tried to while away the time at the Despatch Box and send the Opposition to sleep with a speech of metronomic number-crunching. He talked of the problems attributed to the war, the need to fund new counter-terrorism measures at home and the global economic uncertainty that accompanied them. Already, £3bn had been assigned to the troops, Brown told MPs, and more would be given as required to fund the reconstruction of Iraq, as he revised down growth targets and revised up borrowing - though not by as much as had been predicted.

Apart from that, Brown provided slim pickings for a Labour Party still reeling from the war and the diplomatic mistakes that preceded it. Baby bonds provided an eye-catching mini-diversion, but the amount that newborns of today might accrue by the time they reach university age will be but a pinprick when set against tuition fees. The extra money for pensioners was welcome, but compared with the rabbits Brown has brought out of the hat in previous budgets, it was but a minor flourish.

This was Brown at his most defensive. National Insurance has gone up. Council taxes have gone up. Money is flooding into the public services, but the results are uncertain. We may grumble over here, was the message, but it ain't half as bad as Japan or, as he articulated with a certain relish, "the euro area".

He promised to deliver his assessment on the five economic tests by the first week of June, but he did little to hide the sentiment that he would rather have it over and done with now. Blair, who still wants a "yes" assessment, has not given up hope that any postwar boom might force the hand of his chancellor. The room for manoeuvre is whether to dress up any postponement as a "no, not for the foreseeable future", or a "yes, we're nearly there; we'll have another look in six months".

The sniping against Brown has disappeared for the moment, but any rancour in the final weeks of the euro decision - a decision to be taken privately by these two men and these two men only - could lead to a resumption of domestic hostilities.

A reinvigorated, postwar Blair is being encouraged by some of his people to carry out a major reshuffle - one not forced on him by resignations but one in his own time and on his own terms - to craft a new team to take him to the next general election. Such speculation is designed to undermine Brown, to show who's really boss.

While the war may provide cover for the next 12 months, Brown's real test will be the speed and strength of any economic recovery in subsequent years, in the closing stages of this second Labour term. After the overconfidence of the last Budget, Brown might have wanted to err on the side of caution. Instead, he is forecasting a robust improvement in the state of the UK, bolstered by a similar upturn in the US.

In his optimism, he is unwittingly falling into the same trap as Blair. They are both now presenting themselves as hostages to Bush. For the PM, it is in the belief that the Americans will deliver an enlightened post-Saddam settlement for the Middle East and beyond; for the Chancellor, it is the hope that Bush's brave new military world will lead inexorably to a brave new era of economic wealth.

There is a striking symbiosis in the positions of these two founding members of new Labour. Both have been chastened by recent events, and both now require, in their different ways, the generosity of a very Republican US president.

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