John Rentoul: A power play to match Blair v Brown

Having alienated three key figures in his party, the new Labour leader will need every ounce of authority he can muster

Just when David Cameron thought the centre ground was his for the taking, it wasn't. He and his tactics consultant – sorry, Chancellor of the Exchequer – thought they could steal a bit of Labour's natural territory from Ed Miliband before he got properly started, but it didn't quite work out. "I know," said George Osborne, although I am making up his actual words, "let's hit him with a cut in child benefit for the better off; it's a left-wing policy many people in the Labour Party will support and he won't know whether to oppose it or not."

Well, the new Labour leader was certainly silent on the issue for several days, but his reticence didn't damage Labour. If Ed Miliband was dithering, he was by chance also following Napoleon's dictum about not interrupting your opponent when he is making a mistake. The child benefit issue may win out for the Government in the end, but the way it played last week did not enhance the reputation of either the Prime Minister or his Chancellor.

It was an unaccustomed pleasure for some of us on liberal newspapers to hear the Conservatives in No 10 rail against "the right-wing press" after the Daily Mail decided that the child benefit cut was an insult to "stay- at-home mums". And it was a delight for the few of us who took a sceptical view of the charge of "sofa government" levelled against Labour to watch Tory Cabinet ministers squirm on live television when asked if the change had been approved by the Cabinet. Once again, people have become obsessed with process as a substitute for disagreement.

Yet when the Prime Minister's advisers tell me that they think they are in the right position going into the Comprehensive Spending Review next week, it is hard to disagree. The child benefit cut is £1bn taken away from the better off and, if Labour oppose this or any other cuts, Osborne may ask, "What would you cut instead?" Which brings us to Ed Miliband's choice of shadow chancellor. Cameron's script for the reshuffle was the last-minute paragraph added to his conference speech – a speech that was, unusually, more or less written and polished several days before it was delivered. On the day, however, Cameron decided to refer to the new leader of the opposition, saying that the television coverage of Labour's conference wasn't so much of Red Ed as Red Head: "Neil Kinnock was everywhere. He even said he's got his party back. Well, Neil, you can keep it."

Fortunately for those of us who prefer our politics competitive, and want to see the centre ground contested, Lord Kinnock didn't get to keep the party for long. Last week's shadow cabinet appointments saw the new leader turn more abruptly on the Falstaffs who had carried him to victory than any Prince Hal. Ed Miliband embraced his defeated brother's supporters, while repudiating the masterminds of the Brownite faction that had won him the leadership – Nick Brown, the organiser and Ed Balls, the ideologue.

I am told that Nick Brown appealed to Balls to back him in threatening the new leader with awful consequences, but Miliband faced them both down. The leader's ruthlessness looks strong, although it speaks eloquently of the weakness of his position. In sacking Gordon Brown's chief whip and namesake, and in denying Balls the Treasury brief, he has made the right decisions. Yet those decisions reveal how limited his options were, in that his only alternatives would have been patently disastrous. Unexpectedly, he was helped in his choice of shadow chancellor by Balls. The once would-be chancellor persisted in his perversely self-defeating campaign against Alistair Darling's plan to halve the deficit in four years, saying that even this went too far, too fast. Whatever the macroeconomic arguments, for Ed Miliband to have appointed him would have been to hand the coalition the gift of making it seem as if Labour were simply opposing any attempt to balance the Government's books.

Alan Johnson it was, therefore. And Ed Miliband has resisted the first Cameron-Osborne attempt to push him off the centre ground. But what a price he has paid.

He is in the extraordinary position of having inflicted deep and lasting wounds on three people who are key to the power structure of the Labour Party. We know how damaging and enduring such psychological traumas can be. The latest New Labour memoir to add to a saturated market is from Jonathan Powell, Tony Blair's chief of staff, out next week, which reports that Gordon Brown said Blair couldn't call himself a Christian if he reneged on their alleged deal.

Yet Blair hurt only one person. Ed Miliband has done in his brother, Nick Brown and Ed Balls, thus ensuring that neither the Blairites nor the Brownites trust him. The majority of Labour MPs who voted for David Miliband are pleased with the shape of the shadow cabinet, but that's not the same as respecting or trusting their leader, while many of the Brownites are vicious in private about the betrayal of their faction. And personal relations between the leader and his new shadow home secretary are as psychologically flawed as anything in the previous generation.

Ed Miliband feels intellectually intimidated by Balls, who in return has no respect for him. The reality broke through briefly at the New Statesman debate during the leadership campaign, when Miliband said that one of Balls's long answers reminded him of their days in the Treasury, to which Balls replied with cutting sarcasm, "Tell us the answer then Ed, like you always do."

Just as in the plays, the Shakespearean tragedy of one generation seems fated to replay in the next. Ed Miliband has made the opening moves from a limited hand without making the obvious mistakes that would have finished him off before he had even started. But he will have to turn out to be a really extraordinary character to escape the tragic flaws on which his leadership has been built.

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