I've had enough and I'm not going to spin any more

We'll have to call him Peter Millbank. He cannot reveal his identity because he works in the shadowy world of Labour spin-doctoring. And he has an extraordinary story to tell: of stitching up candidates, nailing down members, weaving the New Labour message into the nation's consciousness. Now he's had enough, and he warns there's a rebellion brewing at Labour HQ. Here, anonymously, he reveals a growing crisis to The Independent's Political Editor, Andrew Grice

Despite appearances, the Labour Party's headquarters at Millbank Tower, next to the Tate Gallery in central London, comprises only one floor with a small mezzanine and extension. It's not the whole tower - even though that's what many party members believe from the television news bulletins. In the centre of the huge, open-plan election "war room" on the first floor, like the Sun Queen in the middle of the universe, sits Margaret McDonagh, the party's general secretary.

Despite appearances, the Labour Party's headquarters at Millbank Tower, next to the Tate Gallery in central London, comprises only one floor with a small mezzanine and extension. It's not the whole tower - even though that's what many party members believe from the television news bulletins. In the centre of the huge, open-plan election "war room" on the first floor, like the Sun Queen in the middle of the universe, sits Margaret McDonagh, the party's general secretary.

Her predecessor, Lord (Tom) Sawyer, went along with the open-plan idea when the party moved to Millbank in 1995. He had a partially secluded space in the corner and often retreated to the small meeting room next to it.

Not so Margaret McDonagh. She deliberately moved her desk and her immediate support staff to the centre of the room. (Her desk is computerless, even though she took a degree in computers.) Earlier this year, she went further by reorganising all the senior officials, so that the head of each department sat nearest to her with their own teams stretching outwards, like segments, to the wall.

Outside elections, the atmosphere at Millbank is quiet. A lot of people who work there feel it is not a nice atmosphere, that they are being watched the whole time. There isn't much small talk - the only place for gossip is when you go to make coffee in the kitchen.

Staff dare not be late or leave early, because She Who Must Be Obeyed can see all from her vantage point. Even a straightforward "good morning" from Margaret at 10.30am is read as having a double meaning. When Margaret is around, the normal leaving time is between 6.30pm and 7.30pm. When she's not there and not expected back, the departure times instantly switch to 5pm and 5.15pm.

However, this is a vast improvement from the old days when the late Ron Hayward was general secretary. When asked how many people worked at Labour HQ, he replied: "About half of them." In the 1980s, a work-to-rule was abandoned when it was discovered there weren't many rules, but one of them did say staff had to be at work on time.

Every Wednesday, at 9am sharp, there is a managers' meeting. Occasionally, Tony Blair, John Prescott or Gordon Brown will address it. Every week, the message from Margaret to team leaders is to urge them to make even greater efforts in the struggle ahead.

She wants a culture of "permanent revolution". She believes that if we don't change everything every three or four years, we will all go stale. There is certainly a culture of youth.

Whether there is any longer any real discussion at Millbank is a moot point. Who dared to argue, for example, that the membership retention project - to call on every lapsed member and persuade them to renew their subscriptions - was harming the campaign for the European Parliament elections in June? In any case, many members who joined before the 1997 general election to "get rid of the Tories" were always going to drop out once they had achieved their objective.

Some people complain that they are reluctant to raise issues in case they will be shot down in flames. They say: "We just wish there was a little bit of discussion and listening." Others complain there is too much whingeing and a blame culture.

Staff describe Margaret as "the chosen one", and there are complaints from those who don't like the way she treats people. Her answer is to say: "Am I really that bad?"

She is still young, in her mid-thirties. She is incredibly hard-working and very strong on the work ethic. There is no doubt she is devoted to the party. She owes her own success to that of New Labour and Tony Blair. She supported his leadership campaign in 1994 and he installed her at Millbank. His support for her is crucial.

Once Margaret has made up her mind, there is no changing it. Margaret's instincts are to be a control freak; she would be one even if Tony Blair wasn't. She is hands-on and wants to get involved in everything; she is never too busy to pull the strings.

She has been blamed for the débâcle in the Euro elections. Some of us could see it coming, and felt we should stop kidding ourselves we would not get a drubbing. We took our eye off the ball.

Margaret is from the traditional right wing of the party and used to work for the electricians' union, now part of the AEEU. She is wary of those fellow modernisers who came from the soft left, Kinnockite wing, the Labour Coordinating Committee. Perhaps this explains the apparent tension between her and Sally Morgan, Tony Blair's political secretary at Downing Street and his link to the party.

David Gardner, one of Labour's assistant general secretaries, was seconded to the consultants KPMG. He wanted to return to Millbank but the word is that he is never coming back. If true, that is a waste of talent. Some people think Margaret did not like him having a direct line into Number 10 through Sally Morgan. Mr Gardner's loyalty to New Labour is not in doubt - only his loyalty to Margaret.

Margaret's style is often based on crisis management. Decisions will be put off until they have to be dealt with. But this is sometimes due to the need to find out which way the King [Mr Blair] is leaning. This is what happened over how to handle the party's choice of candidate for mayor of London.

The word is that Margaret played a part in persuading Frank Dobson to stand, that she twisted his arm. But it seems that he did not realise the candidate would be chosen by an electoral college [in which one third of the votes are held by London party members, trade unions and London MPs, Euro MPs and assembly candidates]. Even though this will help Frank, he was unhappy at being seen as part of a Millbank stitch-up. He thought the contest would be held on a "one member, one vote" basis amongst ordinary members.

When Margaret is busy elsewhere, Greg Cook, the party's expert on opinion polling, will stay late to ensure her telephone is answered by a loyal voice. He is the party's former agent in Mitcham and Morden in South London, where Margaret comes from.

Her sister, Siobhain McDonagh, is the MP for Mitcham and Morden. They are both single and share a house in Colliers Wood in the constituency. They are close but there is probably a bit of sibling rivalry between them; although Siobhain became an MP in 1997 and is just as busy as her sister, Margaret is often seen as the driving force.

Labour staffers refer privately to the "Mitcham and Morden mafia" at Millbank, and there is no doubt that it exists. It was no coincidence that a crowd of Mitcham and Morden party members stood outside Downing Street when Mr Blair arrived as Prime Minister on 2 May 1997. You can see the familiar faces in all the photographs.

Another member of the Mitcham and Morden club is Conor Ryan, who used to share a house there with Greg Cook. Conor has just stood down as David Blunkett's adviser to be the spin doctor for the Frank Dobson campaign. This is a typical act by Margaret. She likes to put people she knows and trusts in key positions - even if they are not always the best person for the job. Her habit is legend within the Labour Party. She rates personal loyalty highly and thinks she can turn a sow's ear into a silk purse.

Her culture of relentless work continues in her spare time. In Mitcham and Morden, she will do leafleting, go canvassing on Sunday mornings and attend her local party meetings. The constituency party is promoted constantly as a model for the rest of the country. It is always winning prizes - on membership recruitment, for example.

The number of times that party leaders from Neil Kinnock to Tony Blair visited the marginal constituency would have embarrassed most people, but not Margaret. John Prescott must have wondered what was going on, but he never said anything.

Why does she prefer to choose her close colleagues from friends and acquaintances rather than draw on a wider pool of Labour members? Personal insecurity? Who knows?

Staff here are still totally committed to the party. We understand the desire to win, but many of us are worried about the control freak tendency. We wonder whether there might not be a better way of doing things.

It's not just staff at Millbank who are worried. It also plays very badly with party members across the country, where morale is suffering. We need our troops on the ground. If we don't carry them with us, it will undermine our chances at the next election. We have to remember: we cannot win the next general election from Millbank.