Lord Mandelson shrugs off reports of rift with Gordon Brown

Lord Mandelson today hurried to deny claims that a dangerous rift has opened between him and Gordon Brown.

The Business Secretary was said to feel disenchanted and frozen out after a series of disagreements that had "strained" his relationship with the Prime Minister.

"This is complete tosh," said Lord Mandelson's spokesman after the peer returned to Britain this morning from a trip to India. "It is either made up or put about by someone who is doing neither Gordon nor Peter any favours."

Today's Daily Telegraph claimed the rift was so deep that it could provoke a leadership challenge to Mr Brown over the New Year, saying that Foreign Secretary David Miliband was considering whether to urge him to stand down.

The newspaper quoted an unnamed ally of Mr Brown as saying Lord Mandelson had become "disengaged" and was no longer trying to exert his influence over the Downing Street "war room".

It also quoted an anonymous friend of the peer: "Peter thinks that Gordon has used him to stay in place and has now just disposed of him. Peter is upset about that."

The suggestion of a breakdown in their relationship, one of the most critical in Government, is incendiary. Lord Mandelson is widely credited with crushing the plot to oust Mr Brown last June after disastrous local election results.

But a rift would not surprise Labour MPs because the pair have a complex friendship and a history of seething disputes. They spent the best part of Labour's first decade in power refusing to speak to one another because of a feud dating back to the 1994 leadership contest.

Mr Brown's close ally Ed Balls, the Children's Secretary, has been perceived as gaining influence over Labour's strategy at the same time as Labour has begun to eat slightly into the Tory poll lead.