The Labour party now has three weeks to save itself from oblivion. The only question facing MPs is whether the open fratricide that would follow a challenge to Gordon Brown would be preferable to the death by a thousand humiliating cuts if the Prime Minister sits tight at Number 10.

The European and local council elections on 4 June have been as good as written off by the party. Beyond the Prime Minister’s inner circle there is now a tangible fury at Gordon Brown, with the Damian McBride affair, the Gurkha fiasco and the expenses scandal merely reinforcing what they knew already about the Prime Minister. Where there was once grudging respect and then pity there is now barely disguised disdain. One Labour backbencher told me this week: ‘If on 5 June Alan Johnson was minded to say he was a candidate, a large number of people would crush Gordon in the rush to nominate him. Gordon Brown is destroying the Labour party.’

Last summer, I remember one minister who supported David Miliband’s challenge to the Prime Minister describing the situation as ‘unsustainable’. Is there a situation beyond unsustainable? Reaching for the lexicon of environmental clichés, the obvious word would be ‘meltdown’, but what is happening within the Labour party is now beyond even that. We are approaching the collapse of the whole Labour eco-system.

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Like global warming itself, this has been a gradual process and some people will be in denial until it is too late to reverse the effects of the disaster. But there is now the real possibility that the Labour party will drift like so much polar ice into third-party status. This will not happen immediately and almost certainly not before the next general election. But there is now a potentially lethal pincer movement at work, which will see the Liberal Democrats picking up the residue of left-leaning middle-class voters who still cannot face voting Conservative, while the extreme Right eats into Labour’s working-class heartlands. Some, like Jon Cruddas and Peter Hain, have been warning about this for years, but the party leadership was too distracted by the Blair-Brown carnival and the hubris of easy election victories to listen to the Cassandras.

The electoral system and public doubts over the credibility of the present third party may yet save Labour. This really could have been the Liberal Democrats’ moment. With the two main parties hobbled by the scale of the abuse of the MPs’ allowance system, Nick Clegg should have been perfectly positioned to hold his head high as the leader of a party of moral purity. But it’s not been quite so simple. Although the Lib Dem misdemeanors revealed by the Telegraph are characteristically less colourful than those of their political rivals, the party has no claim to be whiter-than-white. Senior Liberal Democrats who urged the leadership to take a tough line on those caught abusing the system have been asked to remain silent for the sake of party unity. ‘I was told not to rock the boat,’ one said this week. This is a tactical error.

Liberal Democrat strategists are wisely playing down the significance of the latest Times/Populus poll which sees their party within four points of Labour. The Lib Dems came fourth behind the UK Independence party in the 2004 European elections and they know there is no room for complacency. But despite the sneers of the Westminster village, we now have a three-party system. The brilliant long-term strategy of party backroom officials such as Lord Rennard (known as ‘God’ in Lib Dem circles) means that seats for the party have risen from 20 in 1992 to 62 in 2005 and could hit 70 at the next election. Labour analysts believe they can win back university seats lost to the ‘Iraq factor’ and that the Lib Dems will lose seats to the Tories. But this is reckoning without a total collapse of Labour support.

We’ve seen it all before: a tired, discredited candidate devoid of ideas, a demoralised party in denial over the gravity of the situation it faces, a blinkered, cultish cabal surrounding the man at the top. It’s as if the Labour high command has been using last year’s catastrophic mayoral campaign by Ken Livingstone as a template for Gordon Brown’s leadership. It risks making precisely the same mistakes made in London. Frozen by fear and an inability to ditch a discredited candidate, the party stubbornly sticks with the devil it knows out of a misplaced sense of loyalty.

It is not for me to say whether the Labour party should ditch Gordon Brown, although I understand why columnists who once placed their hopes in the Prime Minister feel the need to disown him now. Brown has called for ‘extreme action’ in response to MPs’ expenses claims, an unfortunate choice of phrase for a man notorious for his indecisiveness. It will be near impossible to draw a line under this. Politicians at Westminster know full well that the expenses scandal will not end here. When the full details of allowance claims are published over the summer the local media will make it their business to hold obscure sitting MPs to account for the most trifling purchase.

I have lost count of the times I have written that Labour party morale is at an all-time low. It is possible that it was worse in 1970, 1979 or 1992, but it must be a close-run thing. Certainly it is difficult to imagine a time when the political class was more despised. There is a significant phenomenon which emerges as parties lose the will to fight: it’s called the ‘spouses syndrome’. This is particularly sapping for Cabinet ministers. But partners of Labour MPs across Britain will be saying over the weekend breakfast in the constituency: ‘You put in all these hours working for your constituents. You’re never at home. And still they think you’re a crook. What’s the point?’ 

There is something profoundly and specifically damaging to the government about the expenses revelations. Take for example Hazel Blears, a woman who prides herself on her loyalty, integrity and working-class background, who is paying £13,000 to the Inland Revenue to save her reputation. This is considerably more than someone living on the minimum wage in her constituency would earn in a year. It is quadruple what someone who lost their job in the recession could claim in Jobseeker’s Allowance in that time. This is a potentially defining moment in the history of Labour because it hits at the very idea of itself as the party of the underdog.

This article first appeared in the print edition of The Spectator magazine, dated