Blair brings in a younger generation

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.Tony Blair this week suffered one of the biggest shocks of his seven-year premiership. For weeks, the prime minister had given his support to David Blunkett, the home secretary, as he sought to confront the allegation that his private office had helped to fast-track a visa for his former lover's nanny to stay in the UK.

Throughout Mr Blunkett claimed that nothing of the kind had happened. But on Wednesday, the beleaguered 57-year-old told the prime minister that an independent inquiry had established that an official in his private office did indeed help to fast track the visa application (see below).

The inquiry had found a "smoking gun" in the form of an e-mail from that official to the agency charged with issuing such visas. At the end of a 40-minute conversation, Mr Blair and Mr Blunkett agreed that it would be impossible for the home secretary to defend himself against the perception that he had abused his public office. "Tony was shocked," says one of his closest aides. "He had not expected this development. But he knew David had to go."

Since 1997, Mr Blair has seen two cabinet ministers - Peter Mandelson, the former trade and industry secretary, and Stephen Byers, the former transport secretary - resign in the thick of a similar media frenzy. But Mr Blunkett was far more senior. And the gravity of the home secretary's resignation goes further. Mr Blunkett was one of the few cabinet figures who appealed directly to working class voters rather than to the metropolitan middle class which identifies more closely with Mr Blair. He was also the architect of a raft of legislation enhancing security and safety at the heart of the government's legislative programme and its campaign to win a third term.

To lose such an ally six months before the expected date of the general election is a potential disaster. But one of Mr Blair's political strengths is his ability to turn moments like this to his advantage. In the six hours after Mr Blunkett left his office on Wednesday, he engineered a swift cabinet reshuffle that stabilised the government. The changes strengthen Mr Blair's grip on the cabinet. They may also have undermined Gordon Brown's chances of one day succeeding the prime minister to the Labour leadership.

"Blair has botched so many of these reshuffles in the past and to have done so this week would have been a disaster," says one senior government figure. "But at the end of this week things are back on track."

Charles Clarke, the new home secretary, is the central figure in the new cabinet line-up. Mr Blair's closest allies knew at an early stage of the Blunkett crisis that, if the home secretary were to fall on his sword, his job would go to this competent 54-year old "bruiser". Mr Clarke is a former junior Home Office minister and knows the department well. In his last job as education secretary, Mr Clarke demonstrated that he could stand up to the immense political pressure that came with the introduction of university tuition fees.

He will certainly need such resilience now, something that became all too clear on Thursday on his first day in the job. Nine Law Lords ruled that detention without trial of foreign terrorism suspects was unlawful - a judgment that forces ministers to rethink key elements of their anti-terrorism strategy. Within hours of taking over, Mr Clarke found that a key plank of the government's tough stance on law and order was under threat.

Mr Blair's aides believe the Law Lords' judgment is less politically damaging than it may seem. In the run-up to the election, his main concern is that Labour must not yield ground to the Conservatives as the party most committed to cracking down on crime and terror. "To most people, the Law Lords' judgment that we should go and release people who endanger the community just looks whacky," says a senior Blair aide. "The judgment certainly doesn't make us look weak on terror."

Even so, Mr Clarke will now have to modify the 2001 Anti-Terrorism Crime and Security Act. And that is only one of his challenges. On Monday, he will begin steering through parliament the government's plan to introduce identity cards. The suspicion at Westminster is that Mr Clarke is far less keen on identity cards than Mr Blunkett. "Not so," says a senior Whitehall official. "All his interventions in cabinet show he is right behind the policy." But this same official suggests that, after the election, he may revisit Mr Blunkett's policy of imposing tough sentences that boost the prison population. "Here Charles will want to be more creative," he says. "He will want a bit more dialogue with the civil liberty groups than we have had so far."

Mr Clarke's appointment to one of the three top offices of state strengthens Mr Blair's control. But the other appointments are also politically resonant. Mr Blair's allies argue that they boost the government's plans for radical reform of public services and signal the start of a generational shift in the top Labour ranks that will be extended if Labour wins the next election.

Ruth Kelly's appointment as education secretary at the age of 36 will attract the most attention. She is the youngest woman cabinet member in history, nine years younger than Margaret Thatcher when she was first appointed to the same post in 1970. As a mother of four, Ms Kelly - a highly competent media performer - will be an asset to Labour's "family friendly" campaigning strategy.

But it is Ms Kelly's work in the past four months as a cabinet office minister - displaying a strong modernising streak in key Whitehall meetings - that particularly impressed Mr Blair.

Ms Kelly has said little in public on where she stands on the modernisation of state services and the need to introduce diversity and choice. But privately she has shown herself to be a committed Blairite, say the prime minister's allies. She is said to have kept alive the possibility of putting a limit on the length of time that people can receive incapacity benefits. This is a policy that Labour could introduce in its third term as part of its plan to reform the welfare system, but it has been resisted by Alan Johnson, the Work and Pensions Secretary.

More significantly, she has pressed ahead with manifesto plans to offer parents a greater choice in state schooling for their children, expanding the possibility for central government to provide more city academies and faith-based schools. "Charles Clarke was somewhat resistant to this drive, believing the overall goal should be to push up school standards," says one government official. "But Ruth will push through the radical reform of secondary schooling that will be a core feature of Labour's third term."

David Miliband's move to be minister of state at the cabinet office in place of Ms Kelly is also significant. This is a sideways shift for the 39-year-old Mr Miliband, widely regarded as one of the prime minister's closest ideological soul-mates. He will be disappointed not to have got the post of education secretary. But senior officials say Mr Blair has promised Mr Miliband a cabinet post after the election. The appointment, meanwhile, of Stephen Twigg, 37, as the new schools minister is another sign of generational change.

What do these appointments say about Labour's long term future? Inevitably, they will be viewed through the prism of the frosty relationship between Mr Blair and Mr Brown, who has never disguised his determination to succeed to the Labour leadership.

Mr Miliband's appointment to the cabinet to work with Alan Milburn, Labour's policy supremo, will be seen by some of Mr Brown's allies as a sign that the chancellor is being further sidelined in the writing of Labour's election manifesto.

But some of Mr Brown's supporters are more perplexed by Ms Kelly's appointment. "It is pretty extraordinary," says one ally. "As a Treasury minister, she handled the fallout from Equitable Life (the troubled mutual life assurer) pretty well. But that's a job where the officials are doing a lot of the work for you. To go from that to a massive spending department in the space of a few months is going to be challenging."

If there are tensions between the Blair and Brown camps over these moves, it is also because of the implications they may have for the long-term race to succeed the prime minister.

Mr Brown is still the dominant figure in cabinet. But Mr Blair has dashed Mr Brown's hopes of early succession by saying that he will stay on until 2008. This week's moves may undermine Mr Brown's chances of getting to Number 10 further.

Mr Clarke's appointment as home secretary may increase his standing in the leadership stakes, even if British political history is littered with examples of powerful home secretaries (Douglas Hurd and Roy Jenkins among them) who never made it to the top job.

The Kelly-Miliband generation might conceivably fancy their chances, too. By 2008, Ms Kelly will be 40 and Mr Miliband 43, roughly the age Mr Blair was when he became Labour leader. Their odds might be boosted if the Conservatives choose one of the younger generation of MPs to replace Michael Howard after the election.

But many Labour MPs will go on thinking that the premiership is Mr Brown's rightful inheritance. And the chancellor's strong standing with the the trade unions would still make him a firm favourite to win a Labour leadership election in four years' time.

The ability of the younger ministers will also be severely tested. They will note how David Lammy, the 32-year-old civil justice minister, has long been seen as a rising New Labour star. But this week he damaged his reputation by mishandling the controversial Mental Capacity, or "living wills", Bill in the Commons.

At the end of this most turbulent week, Mr Blair's attention will be back on the strategy for the general election. There are challenges he faces over the next few weeks that are more serious than the Blunkett crisis - above all developments in Iraq. If Iraq's planned January 30 elections are derailed, Labour could continue to find it hard to galvanise its core voters.

But Mr Blair's private thoughts this weekend will also be with Mr Blunkett. "People like Charles Clarke and Ruth Kelly are strong politicians who'll do well in their new jobs," says one cabinet minister. "But few ministers are ever able to communicate with working class people quite like David. That's what we are going to miss."

Five words that sealed a minister’s fate

ir Alan Budd’s inquiry into the visa allegations against David Blunkett never seemed likely to draw blood, let alone lead to the home secretary’s resignation, writes Christoper Adams.

The publication of Sir Alan’s full findings, expected on Tuesday, will mark the third time in a year that the inner workings of a Whitehall department have been exposed to public scrutiny by an official investigation.

In claiming a big ministerial scalp, the inquiry has already had a much bigger impact than Lord Hutton’s into the death of David Kelly and Lord Butler’s into the intelligence on Iraq’s weapons.

When Mr Blunkett himself ordered the investigation - after allegations that he “fast-tracked” a visa application for the nanny of Kimberley Quinn, his former lover - he could not have imagined the outcome. Within days, Sir Alan uncovered something so uncomfortable for the former home secretary that he had little choice other than to quit.

So what was this damning piece of evidence? According to Mr Blunkett, who used a statement and a series of interviews on Wednesday to set out some of the findings, it was an e-mail just five words long that said: “No favours, but slightly quicker.”

This was not sent from Mr Blunkett’s private office. It came from the Immigration and Nationality Directorate in Croydon, which is responsible for immigration control.

The damaging e-mail was sent in reply to one from an official in the home secretary’s office asking about the application’s progress. The contents of the first e-mail are not public. Nor are the details of an earlier, separate letter faxed to the directorate, which has not survived.

Sir Alan is believed to have discovered the evidence as a result of re-interviewing officials, and possibly after testimony from Ms Quinn and Leoncia Casalme, the nanny. They may have suggested Mr Blunkett had been in possession of a letter telling Ms Casalme her application could take a year to process.

The original allegations against Mr Blunkett that led to the inquiry had centred not on the letter but on the visa application form, which he confirmed checkingthrough his private office. However, he claimed his involvement ended there.

That assertion, used by Home Office officials to rebut newspaper allegations, has turned out to be at odds with what Sir Alan has learnt. A timeline of events issue d by Mr Blunkett’s aides on Wednesday, and agreed with the inquiry, suggests his original account was misleading.

In a sense, that is just as damaging as the e-mail. As the prime minister’s official spokesman told reporters, the reason for his departure was the “mismatch between his recollection and what turned out to be fact”.

In fact, according to the timeline, the letter faxed from Mr Blunkett’s office to the IND was the same one that was sent to Ms Casalme. Ms Quinn had given it to the former home secretary over dinner. But, as the fax no longer exists, nobody knows for sure what instructions, if any, accompanied the letter.

The significance of the fax and exchange of e-mails is that they show, contrary to Mr Blunkett’s denials of any further involvement beyond checking the form, that the visa was fast-tracked as a result of action taken by him, by staff in his private office, or both. Mr Blunkett admitted this on the day he resigned. He conceded he had always been aware of the letter. And, while he could not recollect holding a copy of it or issuing any instructions, he admitted to putting it in with his personal work.

He implied that the reason for this was his concern that officials get to grips with a backlog of visas, rather than an attempt to get the nanny’s application handled more quickly.

All this has sparked Conservative accusations of a cover-up. Why is it, the Tories are demanding to know, that crucial documents are missing and that civil servants appear to have forgotten conversations they had (there were new allegations last weekend, denied by a spokesman for Mr Blunkett, that he had waved the letter in front of officials)?

The Conservatives also want to know whether Sir Alan has found any evidence that documents were destroyed or e-mails and computer files were deleted - and if so, by whom.

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