Byers: Milburn associate

Alan Milburn would be an "excellent" leader of the Labour Party, former transport secretary Stephen Byers said on Sunday.

In an intervention that will further anger the Brown camp, Byers suggests there is an alternative to the chancellor once Tony Blair steps down.

Predicting that Milburn's return to the Cabinet as campaigns chief will make a "big difference", Byers calls for Labour to set out a clear programme for a third term.

Byers is a close associate of Milburn - and a member of the so-called "North East mafia" of senior MPs - who is set to play a key behind the scenes role at the next general election.

Like his parliamentary neighbour he believes Labour must carve out a distinct third term identity.

And in a coded warning to the chancellor, Byers warns that anyone who seeks to destabilise the government by putting personal ambition ahead of party loyalty will pay a "high price".

Leadership

But it is his remarks concerning the future leadership of the party which will raise eyebrows within Labour ranks.

Asked whether Milburn had the qualities for the top job, Byers replied: "I believe he has. I think he would be an excellent leader of the Labour Party and an excellent prime minister, but I am not sure Alan has even begun to think about these things.

"I think he is a huge addition to the Cabinet and he will make a real difference."

Amid predictions of looming clashes between Milburn and Gordon Brown, Byers denied that the new campaigns supremo was further to the right than Blair.

Milburn

He said it was "barking mad" to suggest Milburn was a "neo-Liberal Thatcherite".

However party sources concede that Milburn wants to develop a radical agenda for Labour's third term.

This is said to contrast with the "safety first" strategy supported by some close to Brown.

In a carefully timed intervention, Byers warns that a failure to develop radical policies could lead to Labour winning the next election "by default" rather than on merit.

"What we have got to do is to have a very clear programme that we will put in place in the third term. If we don't do that, we will have no momentum going into the third term and the third term will just wither away and there will be no great achievement," he said.