The best of neighbours in Downing Street

Donald Macintyre on the key relationship

It remains the most important friendship in British politics. In and out of each other's offices every day since the middle of the 1980s, Tony Blair and Gordon Brown have an ideological outlook and mutual understanding so deep that it's sometimes difficult to decide which of them thought of which idea first.

The relationship between Prime Minister and Chancellor, First and Second Lords of the Treasury, is always a complicated one. Some of those around Ken Clarke, for example, left office with the clear view that tensions between the Chancellor and the Prime Minister are built into the system: their relationship was better before, and has been better since, they lived next door to each other in Downing Street. But the intimacy and frequency of the contacts between Brown and Blair works in a way intended to get around that problem; Whitehall officials have been struck, and a little alarmed, at how often the pair meet without civil servants. The result is something that is less an institutional relationship between Numbers Ten and Eleven Downing Street, and more that of old friends - albeit for a brief but momentous period rivals - who know each other extremely well and who can and do endlessly discuss in complete privacy the great issues of government and how to tackle them.

Nevertheless the Clarke-Major relationship, and before it that of Lawson and Thatcher, showed what an independent power base within the Cabinet a strong modern Chancellor can have. The one real scoop in the recent Channel Four documentary Bye Bye Blues was an interview with the former Tory chairman Jeremy Hanley who described how, not once but twice, Clarke commanded a majority of the Cabinet against a minority which included the Prime Minister. On the first occasion Clarke forced through a decision in favour of his increasing VAT of fuel, only to be subsequently defeated in the Commons. On the second, Clarke successfully resisted the funding increase sought by the then Education Secretary Gillian Shephard. When the issue was forced to a vote, the majority went with Ken Clarke, even though John Major backed Mrs Shephard.

So it would not be surprising if, on those occasions when Blair and Brown do have differences, Brown sometimes got his own way. (A recent, if entirely internal Labour Party, example is the case of the selection of the candidate to fight the Paisley by-election. Gordon Brown conducted a formidable lobbying operation on behalf of Douglas Alexander, who is now the candidate. He will almost certainly be a first class MP. But another able candidate, Pat Macfadden, who works in the Prime Minister's policy unit dropped out after at least one meeting between Brown and Blair.) Still, on most of the big issues, the Prime Minister has chosen his ground carefully, and has eventually got his way. There are two important examples from before the election: Brown didn't get his new top tax rate of 50 per cent; and Blair insisted on matching the Tories' pledge to have an EMU referendum - even though Brown had at one period proposed making the manifesto commitment of support for the single currency sufficiently strong that the election itself would have provided a mandate to take Britain in.

Which helps to put the hot issue of the day in perspective. A spate of newspaper stories - the latest of which appeared yesterday in the Daily Mail and Glasgow's Herald - have predicted EMU entry in this Parliament. This has looked awfully like Brown's allies seeking to force the pace on the timing of British entry (though it could also be an attempt to talk down the job-threatening level of the pound). But whether or not Brown wants to go faster than Blair, all the signs are that the Prime Minister is still extremely wary about the timing of a referendum.

You can talk to ministers who will say that the momentousness of the risk is over- estimated, and even that the Government could come back from a defeat in an EMU referendum. That isn't, I suspect, quite how the Prime Minister sees it. Before he and Robin Cook announce plans for the British EU presidency at the beginning of December, he and Brown will surely have agreed a statement confirming that the UK will not enter EMU on January 1, 1999, but that it intends to do so do when the conditions - including the Europe-wide prospects on jobs - are right for British entry. For Britain to retain influence in the EU, while being outside EMU, that will have to be pretty convincing to Britain's partners. But the timing is another matter.

Of course a referendum before the next general election is possible. So is putting an EMU pledge in the next general election manifesto. But a referendum after the next general election is likelier still. There are ministers who say the Prime Minister would not want a referendum this side of an election unless he could persuade Rupert Murdoch's newspapers to drop their still vitriolic opposition to EMU. Whether or not that's true, public opinion will take time to turn round (not to mention a few prominent Cabinet sceptics like Jack Straw.) The Conservative Party - admittedly without Clarke and Heseltine but with Michael Portillo and Margaret Thatcher - would be galvanised, spoiling for the fight. Television would have to give equal time to both sides. Defeat might be highly unlikely, but it would be catastrophic.

For whatever siren voices say to the contrary, the Prime Minister would indeed be betting the ranch; it's hard to see how a government could come back from a referendum defeat on something so fundamental and win the second term Blair so badly wants - never mind the impact on Britain's future in the EU: forget about EMU membership for a generation.

The Brown-Blair relationship is at the heart of the Government's success. No-one knows better than Blair how indispensable a motor of modernisation Brown is. Probably these issues will all be settled in the ebb and flow of constant and comradely discussion between the two of them, well away from the spin doctors. But while Brown may be as strong as Clarke, Blair is not John Major. If it comes to it, Blair will not be for bouncing.