Gordon fails to get a grip as his Cabinet implodes

Mr Blair, it is said, stared horrified at the miserable scene, exclaiming: "Gordon, get a grip! That is not what being Prime Minister is all about."

The story may be one of Whitehall's many myths but it sums up the febrile atmosphere in a Government in 24-hour crisis since the expenses scandal erupted. Fuelled by fear and panic, Cabinet discipline is crumbling just at the point when Labour needs unity to fight tomorrow's critical elections for local and European seats.

Mr Brown himself has struggled to keep his temper when challenged that he failed to act early enough on expenses abuse. After a Sky interview on Monday, he is said to have yanked off his microphone and thundered: "How dare you broadcast such false allegations on air?"

Around the Cabinet table, where ministers had a long session yesterday, sideways glances flickered to colleagues nursing fear or resentments. Chief among them was Hazel Blears, described as in "volcanic" mood after repeated signals from No 10 that she faced demotion and, it now emerges, warned by the Cabinet Office that she may face further embarrassment over her expenses.

This morning she jumped — and in a manner that seemed calculated to undermine the Prime Minister. Her friends believe she may go public with a denunciation of Mr Brown's shortcomings once the elections are out of the way.

Eyes are also on Caroline Flint, who praised Ms Blears warmly this week and also made a point of attending the swansong Commons statement last night by Jacqui Smith, the Home Secretary, another Blairite.

Another victim of behind-the-hands whispering that she was to be sacked, Ms Smith smashed a taboo by confirming she had told the PM she would quit. She had a warm chat with Mr Brown on the phone later and the pair pledged loyalty. But both knew that by making herself an instant lame duck Home Secretary, she had taken away from Mr Brown the option of delaying the reshuffle beyond Monday.

Within hours, one of Mr Brown's key fixers, Cabinet Office Minister Tom Watson, had done the same. His desk lies a yard from Mr Brown's own desk in the Downing Street open plan war room, indicating what a central player he is in Mr Brown's political machine, short of antennae since the resignation of disgraced Damian McBride.

Mr Watson is an ally of Ed Balls, the hugely influential Children's Secretary who is hoping to emerge from the expenses chaos as Chancellor, a lifelong dream. The prospect dismays colleagues, who say he is already over-powerful from his mentor-pupil relationship with the PM and a network of friends at No 10. The idea of such a figure holding the purse-strings and effectively dictating policies from the Treasury worries spending ministers.

Brownites in the Cabinet counter that colleagues have to "hold their nerve" and remain unified until an election next spring. They were amazed Mr Miliband had publicly tried to dig in at the Foreign Office. Despite the reshuffle speculation, Mr Miliband reiterated his line yesterday that he wanted to emulate Ernie Bevin, who spent five years in the post and was Labour's longest serving Foreign Secretary.

"Surely, when asked about a reshuffle, all you say is I'm happy doing my job and the rest is up to the Prime Minister. You don't make it sound as though you are trying to tie the PM's hands," one minister said.

Peter Mandelson is being tipped to replace Mr Miliband. Some in No 10 caution against such speculation, pointing out the Business Secretary was brought back into government for his consigliere skills and that would be lost if he were to be given a globe-trotting job.

But his return to Government means the fault-lines in the Cabinet no longer run along simple cracks in Blairite-Brownite relations. Mr Mandelson's standing as one of the architects of New Labour means many of the younger Blairites defer to him. But his support for the PM is testing the patience of some younger ministers who believe Mr Brown is the problem.

Supporters of Alan Johnson, the front-runner in any leadership race, were dismayed to see Mr Mandelson declare on Monday that no one could compare to Mr Brown. "I look around the House of Commons and I do not see a bigger figure, somebody with a better grasp of the challenges facing our country," Mr Mandelson had said.

But another Cabinet minister said Mr Mandelson's best hope was to bind himself to Mr Brown because he was too old to become Foreign Secretary in a Johnson-led government, let alone a Miliband or Purnell-led administration.

Jack Straw has also faced criticism from younger colleagues. "It's amazing Jack got off so lightly about double-claiming his council tax," one MP added. The big loser from all this infighting and intrigue is Mr Brown's authority. Mr Blair's reported plea to "get a grip" may never have been more timely.