Fateful encounter that could seal Brown's fate

To lose one cabinet minister is bad luck. To lose two – within 24 hours – is the sort of carelessness that could finish off Gordon Brown's leadership.

While Jacqui Smith was making her last Commons appearance as Home Secretary on Tuesday afternoon, one of her closest Cabinet allies, Hazel Blears, was being ushered into the Prime Minister's study for a fateful encounter.

After fielding parliamentary questions for an hour, the Communities Secretary made the short journey to Downing Street for a meeting she had requested with Mr Brown.

She told him plainly she thoroughly objected to his saying on television that her expenses claims had been "totally unacceptable" when he had been so quick to defend Geoff Hoon and James Purnell, the other ministers facing similar allegations. Though there were no raised voices, Mr Brown's reaction left her with a powerful suspicion that she was only days away from being sacked. That evening, she decided she would follow Ms Smith's example and jump first.

At 9.45 yesterday she was back in Downing Street, resignation letter in hand. Unlike Ms Smith she revealed the news herself, knowing that two hours later Mr Brown would have to face Prime Minister's Questions.

Appropriately she was wearing a brooch bearing the words "rocking the boat". It was a slogan that barely begins to describe the turmoil her provocatively timed resignation on the eve of today's council and European elections had on morale.

Her disillusionment with Mr Brown was hammered home in a resignation letter warning that Labour had lost touch with the electors – and avoided any praise for his leadership. She said: "I want to help you and the Labour Party to reconnect with the... people, to remind them that our values are their values, that their hopes and dreams are ours too, and to expose the policies of the Conservatives."

Already reeling from the news on Tuesday that three ministers including Ms Smith would resign, No 10 had been desperate for a quiet day. With its hopes dashed by Ms Blears and signs growing that her departure would trigger a wider rebellion, Mr Brown's allies hit back by pouring scorn on the outgoing Communities Secretary.

They accused her of trying – and failing – to persuade Ms Smith, a fellow Blairite, to resign jointly in an effort to maximise the damage to the PM. They also claimed that she had been forced to step down by fresh revelations over her expenses claims – reportedly uncovered by the Cabinet Office – which would have made it impossible for her to survive.

Two weeks after she voluntarily paid £13,000 to the Commons Fees Office to cover capital gains tax on the sale of her London "second home", it emerged that the money in fact covered two properties in the capital.

A spokesman for Ms Blears claimed that she did not even know that this new disclosure was about to hit her until after she had resigned, and that she had made the situation clear in a statement on her website.

However, it is understood the website was only updated three days after she announced the return of the cash, complete with a flourish of a cheque to the television cameras.

A friend of Ms Blears also questioned why the details emerged yesterday, claiming she appeared to be the victim of a "classic smear operation".

As the reverberations from her resignation hit Westminster, she watched PMQs on a television in her office, then set off on a train back to her Salford constituency surrounded by minders to stop journalists getting to her.

Facing a packed and excitable Commons brought out Gordon Brown's fighting spirit. For a time it seemed that he had launched an effective fightback, which brought cabinet ministers out in front of the cameras defending him. Crucially, they included the Health Secretary Alan Johnson, the man most likely to succeed Mr Brown if he is toppled in the next few days. Peter Mandelson, another key figure, was also emphatic in his support.

But soon more rumours were swirling. Hazel Blears's closest political friend, Europe minister Caroline Flint, was forced to deny that she was about to join the female exodus. And soon it became clear that there is worse in store for Mr Brown. His enemies will stay underground today while voters go to the polls, but will come into the open when the polling stations close at 10pm. Yesterday they signalled their seriousness by leaking in time for the early evening news bulletins the text of a round-robin email that they hope will force the PM to resign. The plotters are planning to go public with the letter if they can muster 50 signatures, but they believe they can attract as many as 80 names from across the party.

There have been conspiracies against other prime ministers, but few that appeared as determined as this. All the signs are that it involves MPs from all wings of the party. The uprising is being taken so seriously that Mr Brown is expected to contact dozens of backbenchers personally over the next 48 hours to appeal for their support.

Labour whips were downplaying the email yesterday, saying it was the work of a hardcore of 12 to 15 malcontents and warning that it would be almost impossible to force Mr Brown out against his will. But one influential Government figure admitted that the situation was so fluid that it was impossible to guarantee Mr Brown's survival. Asked whether the situation was "containable", he replied unconvincingly after a pause: "I think it is."

One minister admitted he was in despair. He said: "People in the country and people in the party want Gordon Brown to go. He is a complete liability on the doorstep – they hate him. If he doesn't go, we face annihilation."

Outwardly loyal, privately mutinous, he reflected the gloom of many Labour MPs yesterday. If people like him decide to break cover, Mr Brown's fate could be sealed within days.

Seizing power: Why the rules favour the PM

One comfort for Gordon Brown is that the Labour Party rule book is there to protect him: it is almost impossible for members to remove their leader when the leader is Prime Minister.

* Any contender needs the signatures of at least 70 Labour MPs out of 350.

* But even then, "a leadership election when in government can only be held if requested by a majority of party conference on a card vote".

* So strictly speaking, iLabour cannot even make a decision to hold a contest, if Brown does not step down, until the annual conference on 27 September.

* Gordon Brown is a stubborn man for whom the tenancy of No 10 is the fulfilment of a life's ambition. He is not going to give up the job willingly.

* The restrictive rules are to stop maverick MPs having a pop at the Prime Minister. But when there is a serious revolt, the rules do not matter, because political realities take over.