If Gordon Brown is to survive as Labour leader until the next election, he will have to change – soon and radically – how he operates as Prime Minister. Doubts about whether he can are at the heart of the current soul-searching among Labour MPs.

The official view, put forward yesterday by Mr Brown and his allies, is that Labour lost Crewe & Nantwich because of fears about family finances, rising prices and economic uncertainty. But that is, at best, only a partial explanation. For many Labour MPs, including those who were most eager for Tony Blair to go a year ago, Mr Brown has now become the problem.

The by-election defeat was the culmination of a dire 2½ months that resulted in a collapse of public confidence in Mr Brown, reported both by canvassers and by every recent opinion poll.

Mr Brown has few options. An early Cabinet reshuffle would be likely to smack of panic and be seen as a change for change’s sake. Such ministerial moves seldom make any difference or impress voters. Moreover, any fiscal leeway he had was used up by the £2.7 billion tax cut he gave last week to address the 10p tax row and the increase in fuel and food prices. Mr Brown has already announced the outlines of the next legislative programme and anyway, despite his activist instincts, the problem now is not a shortage of initiatives, but too many. They are often blurring any sense of priority and direction.

The real problem is of good government. Mr Brown’s justified claims about addressing long-term challenges are in conflict with his short-term indecisiveness – summed up by the word dithering – which has created a log jam in the Downing Street machine. That is why his failure to address early enough the problem of the 10p tax change has been so damaging. But many ministers are unsure whether Mr Brown can change: to become less hectic, more focused and patient, avoiding either activity for its own sake or spurious dividing lines with the Tories.

We are now likely to see an anxious period of speculation and plotting. Even those MPs who perceive Mr Brown as the problem are wary of a leadership election campaign, which would last two to three months. There is also no obvious successor who could dramatically improve Labour’s fortunes. Indeed, there is now a mood of hopelessness and helplessness, a fatalistic belief that Labour is now doomed to defeat, whether under Mr Brown or any successor. But there is a big difference between a narrow defeat, even a hung Parliament, and a 1997-scale rout. There is real danger now that discipline breaks down as Labour MPs seek to save themselves by bending to any local interest. In practice, that would not help MPs in marginal seats, and it could make their prospects worse by weakening the Government and creating an image of disunity, as happened to John Major.

Just as Mr Brown’s poor performance on the 10p tax row in front of the Parliamentary Labour Party early last month triggered the current malaise, so his performance when it meets again when Parliament returns on June 2 could be crucial to his fate. Ministers and MPs have to decide whether to continue with him, or to change leader again in the hope of reducing, if not preventing, electoral defeat.

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