DAN HODGES: Sue Gray knows where the bodies are buried

Morgan McSweeney, newly appointed Chief of Staff to Sir Keir Starmer, isn't really a fan of 'the vision thing'. 'Morgan's attitude is you win elections council estate by council estate,' a Downing Street insider told me. 'As for all that big picture, blue sky stuff, his view is you can keep that for North London dinner parties.'

In the wake of the dramatic sacking of previous incumbent Sue Gray, some Labour MPs were worried it cemented the impression Starmer's fledgling government was already falling apart. But the prevailing emotion among senior Cabinet members was one of relief.

'Oh God, it's so much better!' one exclaimed to me. 'It wasn't working with Sue. Now we've got the opportunity to get things back on track.'

Gray – who only began working for Starmer in September – was seen by many long-serving Labour officials as a carpetbagger, whose primary focus was the development of her own personal profile and powerbase, rather than delivery of the government's agenda.

But of even greater concern was her lack of basic political nous.

'As a former civil servant, she was great at playing Westminster games,' one Minister told me, 'but she didn't have the first clue about how to appeal to voters in the Red Wall.'

In McSweeney – who cut his political teeth routing the BNP from Dagenham after the Far Right-wingers took 12 council seats in 2006 – Labour insiders now believe Starmer has a proper street-fighter at his side. One who is determined to refocus his administration back on to tackling the concerns of working voters.

'When he was in Dagenham, Morgan was polling working class wards consistently,' one former colleague recalled. 'That was how he developed his strategy. And when he was shaping Keir's leadership campaign, he insisted on continuing to poll in East London. It's his way of keeping in touch with what Britain is really thinking.'

McSweeney's first major test of whether he can realign his boss with an increasingly disillusioned electorate, and halt his precipitous slide in the polls, will be Rachel Reeves's Budget on October 30.

Despite Gray's attempts to marginalise him, Reeves insisted McSweeney was given a major role in the planning of the statement. 'We've been working very closely with No10 on this,' a Treasury official told me, 'and Rachel was clear she wanted Morgan in on the preparation.'

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The impact of this co-ordination has been some tough conversations within Cabinet. 'One of the things Rachel and Morgan have been reinforcing is that we do not have the political or fiscal space for tax rises,' a Minister revealed. That's why Treasury aides are pushing back strongly on reports Reeves has been contemplating pushing Capital Gains Tax to a an extortionate 39 per cent. 'It's utter rubbish,' one told me. 'We gave the commitment in the election that we wouldn't raise taxes on working people, and we're going to stick by that.'

Another aspect of the Budget process has been an insistence that any changes reflect what one Labour insider described as 'the people's priorities'.

'The key message that's been delivered to the departments is, 'You are going to have to find savings. So those things we continue to fund are going to have to be in core delivery areas. We can't be wasting money through inefficiency or pet projects the public don't support.'

This is what lead to last week's Cabinet revolt in which a number of Ministers – led by Foreign Secretary David Lammy – pushed back on proposals to cut the foreign aid budget. But Reeves and McSweeney remain unrepentant. 'That budget has not always been spent wisely,' a Treasury aide observed archly.

The new Chief of Staff's influence is also already being felt across the wider government.

Though an advocate of efforts to modernise Labour and reverse the party's catastrophic shift to the Left under Jeremy Corbyn, McSweeney is no classical New Labourite. He believes Tony Blair's failure to recognise the extent of disaffection among white working class communities was partly responsible for the BNP's breakthrough in Dagenham. And he's said to be concerned about Reform's advance in traditional Labour constituencies.

It was partly because of this that McSweeney pushed for last week's high-profile roll-out of a new

Worker's Right's Bill. The legislation was criticised by sections of the business community, and raised concerns Starmer was falling in thrall to his union paymasters. But No10 sources cite a different motivation.

'Morgan is very alive to the Nigel Farage threat,' one No10 insider told me, 'and we think this package will play well with his supporters. Our focus groups and polling are clear. Reform voters like policies that are seen to put working people first.'

There's no doubt that after the chaos of the past few weeks, McSweeney's elevation to the King's Hand has been welcomed by most Labour Ministers, MPs and staffers. But some concerns remain.

For all his political tradecraft, McSweeney does not have any direct experience within government. And the Chief of Staff's role traditionally involves a significant degree of liaison and co-ordination with Civil Service chiefs, the military, the security services and the wider Whitehall machine.

'It's the biggest and most challenging staff role in government,' a veteran of the Blair and Brown administrations explained to me, 'and it's not easy to learn on the job. Morgan's a very smart guy. But getting the right balance between focusing on the politics, and ensuring the apparatus keeps functioning properly, will test him.'

Another Labour insider told me: 'It's OK having this laser-like focus on how to get one more vote than the Tories in Redcar. But you have to have a broader ideological offer. You need to show the country you actually believe in something. And that's what Keir is still failing to do.'

And then there remains the looming spectre of Sue Gray. She was handed the face-saving sinecure of PM's envoy for the nations and regions. But it has since been announced she is 'taking a break' from her role, amid reports she is haggling over severance pay from her former £170,000-a-year position. 'Sue knows where a lot of bodies are buried,' one Minister commented, 'and if she decides not to go quietly, it could become a big headache for us.'

In Morgan McSweeney, Starmer finally has a street-fighter by his side. It looks as if he's going to be needing him.