The Bloomberg news agency reported that Mrs Blair had responded: “Well, that’s a lie” as she heard, on a television monitor, Mr Brown say during his speech that it had been a privilege to work with Mr Blair.

Seven hours later, Mrs Blair issued a denial, telling reporters: “Honestly guys, I hate to spoil your story, but I didn’t say it and I don’t believe it either.”

Downing Street had earlier stated that it was “totally untrue” that Mrs Blair had uttered the remark. However, the agency stood by its version of events through the day and, with Mrs Blair’s apparently difficult relations with Mr Brown well chronicled over the years, most delegates were ready to give the reporters rather than No 10 the benefit of the doubt.

The incident occurred as Mrs Blair was touring an exhibition hall at the conference.

As the Chancellor began his speech, which amounted to a personal manifesto for the leadership, he paid generous tribute to the Prime Minister, saying: “It has been a privilege for me to work with and for the most successful ever Labour leader and Labour Prime Minister.”

At that point, Mrs Blair, who was heading to an office to hear the rest of the speech, was allegedly overheard by a Bloomberg reporter making her “lie” remark.

No 10 called on the agency to withdraw the report but it refused. Mr Brown’s allies were upset not only because the row spoilt what would otherwise have been a good day for him but because they feared that it would remind the public of the infighting of recent weeks.

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