Mili’s band of rivals prepares for battle

Those who assume that Labour is a weak and divided party with no appetite for power should think aga

Located at the end of a long corridor behind the House of Commons chamber, the shadow cabinet room is dark and unprepossessing. It is here each week that Ed Miliband, like his four Tory predecessors, has to rally his colleagues, organise his team and try to plot a route back to government. "It is a very depressing room," observed the then shadow foreign secretary, David Miliband, in May 2010. "It reeks of the absence of power."

But on the morning of Tuesday 25 January, as the shadow cabinet assembled for the first time since the resignation of the shadow chancellor Alan Johnson and the appointment of Ed Balls as his successor, there was a buzz in the air. Less than an hour earlier, the Office for National Statistics (ONS) had announced that the economy had shrunk by 0.5 per cent in the last three months of 2010. The elevation of Balls, it was being said, could not have come at a better time.

Although the room is so small that there are not enough seats for everyone, with latecomers often having to stand, Balls, arriving late to the meeting after having carried out a round of ­media interviews, found his chair opposite Ed Miliband to be empty. None of his colleagues still on their feet had claimed the seat of the man who had suddenly become the de facto number two to the Labour leader.

Lincoln's in

Allies of the Labour leader are mostly relaxed about the promotion of Balls, one-time rival to Ed Miliband for the Labour leadership and his senior colleague at the Treasury. They have read and like to cite the US historian Doris Kearns Goodwin's book Team of Rivals: the Political Genius of Abraham Lincoln, a riveting account of how the great American president brought his three most bitter opponents into his cabinet, thereby maintaining the unity of the nation and his party as well as encouraging collaboration and creative tension.

Team of Rivals has many admirers, from William Hague and Peter Mandelson to the Manchester United manager, Alex Ferguson, and Barack Obama. Obama invoked Goodwin's "brilliant" book prior to appointing Joe Biden and Hillary Clinton to the US vice-presidency and state department, respectively, while retaining the Bush-era Republican Robert Gates at the Pentagon.

Is Miliband, like Obama, presiding over a team of rivals, with the pugnacious Balls as his shadow chancellor; Yvette Cooper, Balls's wife, as the new shadow home secretary; and Douglas Alexander, former campaign manager for David Miliband, as the new shadow foreign secretary? Balls, Cooper and Alexander (and indeed Ed Miliband) are all protégés of Gordon Brown - ambitious, clever, fortysomething politicians from the social-democratic wing of the Labour Party.

Miliband, I am told, has not read Goodwin's book but is familiar with her thesis. Back in October, he knew he had to bind in the Blairites after he won the narrowest of victories over his brother - hence the surprise appointment of Alan Johnson as shadow chancellor. This past week, he knew he could not afford to alienate the Balls-Cooper axis a second time - hence the unsurprising appointment of Balls as Johnson's replacement. "Both decisions were the right decisions at the right time," says an aide to the Labour leader.

Privately, an inside source tells me, Balls now agrees. "It wasn't right for me then," the new shadow chancellor told a friend a few days ago. "It's right for me now."

His first full week in the job could not have gone better: criticisms of the coalition's growth strategy by the outgoing director general of the Confederation of British Industry (CBI), Richard Lambert, on the Monday were followed on Tuesday by the ONS growth figures (or lack thereof).

Having underestimated and caricatured Ed Miliband, the Tories and their cheerleaders in the right-wing press risk doing the same to Balls. He is portrayed as an unreconstructed statist and dogmatic interventionist, even though he was the main architect of Bank of England independence. He has been denounced as a loony "deficit denier", in spite of his Harvard background and rather orthodox, Keynesian approach to deficit reduction - via stimulus, investment and growth.

But the truth about Balls is that he is divisive and disliked by many. "I think he was surprised at how hard he had to struggle to get the 33 nominations he needed to stand for Labour leader from his parliamentary colleagues," says a Blairite member of the shadow cabinet. And "Balls's rise to the top has left behind a long line of corpses," says a former Treasury colleague who worked with both Eds under Brown.

Detox plan

The new shadow chancellor will be moving in to the leader's suite of offices at the Norman Shaw South Building in Westminster. He will be two doors down from Miliband and is expected to attend meetings regularly to discuss economic and, in particular, fiscal policy. Balls's long-serving special adviser Alex Belardinelli has been asked to "work closely" with Tom Baldwin, the Labour leader's new director of strategy. Miliband aides stress there is to be no repeat of the Blair-Brown divisions of old.

I was surprised to discover that most leading Blairites are willing to give their old adversary the benefit of the doubt, at least for now. "I think Ed Balls recognises that this is an opportunity to detoxify his brand," a former cabinet minister and friend of Tony Blair says. "I suspect Ed will be on good behaviour," says a shadow cabinet minister and close ally of David Mili­band. "He knows he's being watched by the PLP, who'll be ready to pounce on him if there's even a sniff of a Sunday Times briefing against any of his colleagues."

Miliband's decision to appoint Balls, Cooper and Alexander - each a potential leader-in-waiting - to the top three jobs in his shadow cabinet was bold. His Lincolnesque challenge now will be to harness the creative tensions, contain the inevitable clashes of personality and confrontations over policy and persuade his talented colleagues to concentrate their fire on the Conservative-led coalition.

The goal is obvious: a quick return to government. "I want to be chancellor of the Exchequer," Balls has been heard telling friends in recent days. Those who assume that Labour, led by Ed Miliband and Ed Balls, is a weak and divided party with no appetite for power should think again. Defeated last May, the party is feeling emboldened once more.