The South Bank show: Chaos in the court of King Boris

The new Mayor of London was meant to be David Cameron's man in City Hall. But the axing of Tim Parker shows that he is determined to be his own person – whatever Central Office thinks

Norman Foster's ultra-modern glass and steel City Hall stands incongruously against the regal architecture of the Tower of London where medieval knights and nobles once vied for royal favour. There may be no Traitor's Gate, with heads on spikes, outside the more modern centre of political power, but the penalty of falling out of favour in Boris Johnson's court can be just as swiftly executed.

That much is clear from the defenestration of the man whom many took to be the right-hand adviser to the Mayor of London. Tim Parker is Boris's third adviser to be thrown to the crows from the eighth floor of City Hall in as many months.

How swiftly the wheel turns. Only last month, Mr Parker was busy briefing members of the press that he was First Deputy Mayor among equals, a business supremo who was the answer to all London's problems. He had taken the office next to the Mayor's own on the east side of the building and seemed to believe himself unassailable.

But if he had only raised an eye from his cost-cutting review of the Greater London Authority, he would have seen a nemesis lurking behind a desk on the other side of the room. For he had been obliged to share the office that had once belonged to Ken Livingstone's chief executive with Sir Simon Milton, King Boris's very own knight, and Deputy Mayor for Policy and Planning. Sir Simon, City Hall insiders say, has performed nothing short of a very British coup.

It is all very embarrassing for the Conservative Party, for there are many who look to the Court of King Boris (Eton, Oxford and the Bullingdon club) and see it as a showcase for what would happen if the country were to elect David Cameron (Eton, Oxford and Bullingdon) as prime minister. King Boris has had an error-prone first 100 days.

First, Bob Diamond departed rapidly as chair of the Mayor's Fund. Then senior political adviser James McGrath went after remarks to the effect that Caribbean immigrants should be allowed to go home if they did not like London under the new mayor. Next Ray Lewis resigned as Deputy Mayor after allegations of sexual and financial misconduct and falsely claiming to be a magistrate. Now Mr Johnson's chief of staff has resigned. It all gives rather an unfortunate impression, for those who look to London for an idea of how the Tories might also run the country.

Tim Parker is a man who exudes ruthless competence. He had amassed a personal fortune of £70m-plus as a hard-nosed cost-cutter at businesses such as Clarks Shoes, Kwik-Fit and the AA. His zeal for asset-stripping was such that he had earned the nickname in the business world of the Prince of Darkness, most notoriously for his three years as chief executive of the AA. He had been put in there by venture capitalists who raised just £500m of the £1.75bn needed to buy the business, saddling the previously buoyant company with a whopping £1.3bn debt.

Mr Parker then set about a slash-and-burn approach to management. He sacked 4,000 of the 10,000 staff and placed 2,000 call centre workers under "dataveillance", watching them on CCTV, logging all key-strokes made on their computers and scheduling lavatory breaks. At the end he presided over the £6bn sale of the business in a lucrative merger with the travel and insurance company Saga, which personally earned him £40m.

The fear of many was that he would do a similar slash-and-burn at the Greater London Authority. But sitting across the room was a political operator of a different cut. Sir Simon may have started his working career in his father's chain of baker's shops but he has been for two decades steeped in the business of Conservative local politics, most recently as leader of Westminster City Council. He is a modern Tory. Openly gay – he and his partner of 20 years, Robert Davis (a fellow Westminster councillor and former lord mayor of Westminster) celebrated their civil partnership amid Tory grandees over tea at the Ritz last year – yet thoroughly Thatcherite. After being deputy to Dame Shirley Porter during the "homes for votes" scandal at Westminster, he took over as leader, presiding over high ratings of public satisfaction over public services, along with one of the United Kingdom's lowest levels of council tax.

The two men were never likely to have got on. Yet everyone assumed that Sir Simon would be swiftly vanquished by Mr Parker. However, the tables were turned in a tale of Machiavellian intrigue.

Tim Parker set out to shake up what he saw as the complacent hide-bound world of local government from the outset. He had undoubted strengths. "He concentrates on the real issues and has good common sense judgement," said one senior Tory insider.

But his abrupt manner was calculated to offend. He talked of London's voters as "shareholders". He described key public services such as the police and Underground as the city's "core products". He displayed a lack of patience with political procedures and priorities. He brought in business types to replace politicos: his replacement chair of The Mayor's Fund was Sir Trevor Chinn, an adviser to the venture capitalists who had stripped out the AA. Most irritatingly he insisted that, since he was chief executive, everyone had to report to him.

The politicians were taken aback. But the most shrewd of them, Sir Simon, was on the back foot. He had been appointed by Mr Johnson as senior adviser, planning, without resigning from Westminster Council. The local Labour Party objected that this was a violation of rules which insist that politicians could not take civil service appointments. He became embroiled in a controversy which forced him to resign from his job and stand down as a local councillor, then be reappointed in a new role by the Mayor.

Sir Simon bided his time. But he ensured that when he was reappointed he renegotiated his job title to be Deputy Mayor for Policy and Planning, then refused to report to Mr Parker. And Mr Parker was rubbbing almost everyone up the wrong way. He fell out with Tim O'Toole, boss of the London Underground. He alienated the other three deputy mayors, Richard Barnes, Ian Clement and Kit Malthouse, all of them local government stalwarts who viewed Mr Parker's cost-cutting as simplistic.

He ploughed on with what became known as the Parker Review, intended to save an average of 15 per cent throughout the Greater London Authority. On 28 August, when contracts for the Mayor's transition team were to expire, phase one of the three-phase Parker reforms was meant to kick-in. The reforms included a restructuring of the eighth-floor offices so the other deputy mayors would find their teams of officials diverted to various council departments and replaced by a single secretary.

As the date neared, Sir Simon saw his moment. "There was an endless stream of people going to Boris," said one senior Tory, "and being politicians they didn't say, 'Parker is always in my back', they said, 'Parker is exceeding his brief'."

Sir Simon launched his coup. "He went to Boris and said, 'Parker is acting like he's the Mayor, not you. Either he goes or I do'," a senior member of the eighth floor revealed. "So Boris was put in a position where he had to grasp the nettle, even though he didn't want to, because Boris hasn't learnt yet that in politics you can't be everyone's friend."

The reason that the chaos in the Court of King Boris is bad news for the Conservatives nationally is that it was Tory Central Office who put most of the key players in post. "During the election campaign, no one had much time to think what would happen if they won," said one senior member of the Mayor's campaign. So it was left to senior Central Office figures, among them Nicholas Boles, Lord Marland, and the then party chairman, Francis Maude, to choose a "transition team".

"Getting a friend of Francis Maude [Tim Parker] in to run the show seemed like a good idea at the time," said one senior Tory. "They told Parker, 'Boris is not a detail man; you can do all that. Tim Parker thought the deal was that he would run London and Boris would put the bubbles in the champagne; Boris had a different view. Parker and Boris didn't talk enough to each other. There was a lack of political experience all round."

Mr Johnson, before he left for Beijing, was doing his best to make out that Mr Parker's departure was a sign that he had decided to take charge himself. Inside City Hall, senior Tories are talking about cutting their links with the Cameron high command and "going it alone".

This is a double-edged strategy. "Boris's team is now overly represented by a group of undistinguished Tory councillors, all of them pretty low-grade, with the exception of Milton," said one former Tory minister. "The danger is Boris will let them have too much sway and they'll run a tame mayoralty which will miss the chance to do radical things. They'll muddle on as they've always done while Boris continues to amuse the nation. The other danger is that Boris will take on too much himself, particularly after saying that he's taking over as chair of TfL because the decisions are all political, and that's not his area of competence."

Some in David Cameron's inner circle are pleased at the clear blue water opening up between the Mayor and their boss. If a sense of failure at City Hall rubbed off on the Tories nationally, that would be bad news for them. "Boris and Cameron are very different types; they went to the same school but that's where their similarity ends," said one top Conservative. "But if Labour can pin on us the idea that this is what happens when inexperienced Tories get into power – they couldn't run a whelk stall – it could be very damaging."

Mr Cameron's best bet is to do with Mr Johnson what Tony Blair did with Ken Livingstone: claim credit for Labour when there was a success, and, when failure loomed, shrug that Mr Livingstone was, like King Boris, "just a maverick".

The Tory HQ camp...

Tim Parker, an astute hard-nosed businessman, is a friend of Francis Maude who was brought in to shake up City Hall. But he lost a power struggle with Sir Simon Milton and has now left Johnson's team.

Nick Boles is a senior figure at Central Office charged with choosing Mr Johnson's team.

Francis Maude is a former chairman of the Tory party with an influential role at City Hall.

The Tory HQ camp... ...and the City Hall camp

Sir Simon Milton has had a long career in local government and is now Mr Johnson's Deputy Mayor for Policy and Planning.

Tim O'Toole, boss of London Underground, did not take long to fall out with Mr Parker.

Richard Barnes, another deputy mayor, believed Mr Parker's cost-cutting drive was flawed.