If Tory lead falls into single figures, Labour believe they have a chance

Alistair Darling worked into the small hours today finalising the small print of the Government's £37bn scheme to take the Royal Bank of Scotland and HBOS into partial state control. As the BBC's business editor Robert Peston put it this morning, it is perhaps the most extraordinary day in British banking history. It’s also another extraordinary stage in the political renaissance of Darling and his boss Gordon Brown.

As John Major said to his first Cabinet meeting, it’s funny how things turn out. Both Brown and Darling had been about to get their marching orders - Brown from Number 10, Darling from Number 11 - but are now racking up the air miles saving the world.

The Prime Minister who was on political death row has had a remarkable new lease of life. While it turns out that Darling, who infuriated his boss when he carelessly remarked in a Guardian interview in August that Britain faced its worst economic situation for 60 years, was guilty only of understating the threat to the UK economy.

We are witnessing, as one veteran MP observed last week, the most bizarre spell in Westminster for years if not decades. Peter Mandelson is back in to the fold and, some say, already offering invaluable support to the PM.

Fourteen years after nationalisation was scrubbed from the Labour agenda with the controversial scrapping of Clause Four, the same party is nationalising many of the banks while the Tories are calling for the Government to take tougher action against fat cat bank bosses.

Against this background, potentially devastating evidence that Tony Blair could have bent the truth over the Bernie Eccleston affair is exposed in yesterday's Sunday Telegraph - and causes barely a ripple of interest.

The question now is what happens next in our once-in-a-generation economic crisis. If multi-billion bail-outs of the world's banks don't work, then what? What possible plan B can there be?

And if disaster is averted, and recession turns out to be shallow and short, will the public return Brown to power in gratitude? Or will they wreak revenge on the man they blame for creating the mess in the first place?

The early signs are that Brown has achieved a marked post-party conference bounce, cutting the Tory lead from the high to low teens. Yesterday’s Sunday Times suggested it was about ten per cent. If that were to fall into single figures, Labour would believe the Tories can be overhauled.

The Conservatives are remaining outwardly phlegmatic, suggesting they're in a pretty good position with some 18 months to the next election. However, I'm told there are tense scenes in Tory HQ where the old strategy book has been torn up by the young guns and wiser heads such as Francis Maude are in more demand than ever.

One final thought. Whispers that the sight is deteriorating in Brown's one good eye (he lost the other in a schoolboy rugby accident) made the papers this weekend. His punishing workload - he has notes and emails prepared for him in gargantuan 36pt - cannot be helping.

FIRST POSTED OCTOBER 13, 2008