The factions square up

There is, as ever within Labour, a third way, and this one seeks a return to the party's true values

The battle lines are now drawn and the fight for the soul of the Labour Party has begun in earnest. In some ways this is a blessed relief. David Miliband's pre-holiday intervention in the Guardian lanced a disfiguring conspiratorial boil that had been festering for far too long. The candidate of the "anyone but Miliband" campaign has yet to emerge, but already there is talk of a union-backed "bloke ticket" of the former deputy leadership candidates Jon Cruddas and Alan Johnson.

For ten years Labour had been a fragile but effective coalition. Now it is once more a set of factions, united only by the belief that Gordon Brown's leadership is heading for the buffers. Only a shift to the Blairite right or the social-democratic left, or a profound reshaping of the government's message in the centre, will rescue the party from oblivion. Gordon Brown's failure to communicate Labour's message is now identified as a potentially terminal problem from the cabinet down. Some ministers generously suggest that the government bears a collective responsibility for failing to get the message across, while others are more direct in their criticism of the Prime Minister. But the real question is whether insurrection will provide the remedy.

There is a possibility that David Miliband has moved too early. By tilting at the Prime Minister so aggressively, he has unbalanced himself, unsettling the Parliamentary Labour Party by such an open act of disloyalty and alienating himself from the unions and the grass roots. At the same time it has opened up the space for the centre-left Compass group of MPs to stake its claim to represent a different vision of the future of the Labour Party: more collectivist, more hostile to the private sector and unashamedly egalitarian. At present, Compass is the faction shouting the loudest in the Labour ranks. Its campaign for a windfall tax on the energy and oil companies is an obvious move to take ownership of the conscience of the Labour Party.

Both groups claim to have the ideas. The "modernisers" coalescing around Miliband have the backing of the Blairites in the Progress group within the Labour Party. Its ideologues are Richard Reeves, the new director of Demos, and Phil Collins, a former Downing Street adviser and speechwriter for Tony Blair. Their "Liberalise or Die" argument suggests that Labour needs to move away from its centralising, statist roots in order to survive in the 21st century. In contrast, the Compass group, led by Neal Lawson, a former lobbyist and adviser to Brown, has argued for a "conversation about tax". Writing in the Independent on Sunday on 3 August, Cruddas reformulated a familiar Labour mantra: "tax cuts for the many, and a fairer share from the super-rich".

There is, as ever within the Labour Party, a third way. This was outlined by John Denham in a Sunday Times article at the weekend urging an end to leadership speculation. In a call for a return to the true values of new Labour, an eminently moderate Denham wrote: "The future needs as much personal ambition and success as the past but most of us will succeed only if we also take care of the common good."

The logic of Denham's position is that Labour cannot present the public with a second unelected leader, so it must redefine its values under a Brown premiership. There is also talk of the need for a Chris Patten figure to act as cheerleader for the party, as the Tory chairman did in the run-up to the 1992 election to cover for John Major's inadequacies. More likely will be the emergence of a praetorian guard of seasoned TV and radio performers to protect Brown from the growing hostility of the media.

A comeback for Prescott?

One figure who may yet make a play for the Patten role is the former deputy party leader John Prescott, who has re-entered the fray as an unlikely blogger on the LabourHome website. His "campaign for a fourth term not a fourth leader" challenges MPs to put an end to the speculation and return to constituency campaigning (his maths isn't dodgy, by the way; he's including John Smith in his calculations). Unfortunately, in his second blog he likened the PM to the captain of the Titanic, but Prescott's re-emergence could yet prove significant.

A textual analysis of the Miliband, Cruddas and Denham articles shows that the three men have much in common. Indeed, there are those on the "liberalising" wing of the party who are very worried about Miliband's social-democratic, centralising tendencies. One conspirator said this past week: "The only concern about David is that he would turn out to be just like Gordon."

Miliband has been done no favours by the "über-Blairite" Stephen Byers and Alan Milburn, who have made it plain he is their candidate of choice. If he looks like he is their creature, his leadership bid is finished. The much-trailed reshuffle will be the most dangerous moment for all concerned. If Brown does not act against Miliband he will be seen as weak, but what if the young pretender does not agree to be shuffled? There is already talk among the insurgents of using a reshuffle to kick off a full-scale revolt.

It would almost certainly be fatal for Brown if several ministers refused new posts and returned to the back benches. The Prime Minister might be faced with the prospect of being able to reshuffle only his closest allies (as their loyalty is assured). His safest route may well be not to reshuffle at all.

But battle has been joined, and everywhere you look the martial metaphors are flying. Some are talking the language of modern warfare. This is an "asymmetric conflict", with one side top-heavy and the other side bottom-heavy.

Miliband has powerful ministerial friends including some at cabinet level. His base in the parliamentary party is weak, however, and polls suggest that his move against Brown has damaged his popularity with party members and Labour voters. The Cruddas faction recognises it has its own weaknesses, but it is ready for the war. One senior Compass figure admitted: "They have a few potential leaders but don't have the troops on the ground. We may not have the leaders yet, but we certainly have the troops."

Cabinet moderates such as John Denham may talk the language of peace, but it may already be too late.