Mrs Blair believes her husband is
more spinned against than spinning
Tony Blair watches as Gordon Brown is applauded
after speaking to the Labour party conference.
Brown was telling the conference:
"It has been a privilege for me to work
with and for the most successful ever leader
and Labour prime minister"
Cherie Blair said "Well, that's a lie"
as she watched a big screen
in the nearby exhibition centre
With Tony Blair due to make an emotional farewell speech to the conference in Manchester today claiming "Labour's core vote is the country", Downing Street went into overdrive to deny that his wife had so contemptuously dismissed the chancellor.
Ironically, Mr Brown had been using his speech to effect a public reconciliation with the prime minister, saying he regretted their differences.
The news agency reporter who overheard Mrs Blair's remark stood by her story and, given the known animus between Mrs Blair and the Browns, the agency was widely believed, including by cabinet ministers.
Some were in despair last night that the meticulous attempts this week to patch up the relationship between the two architects of New Labour had been so carelessly damaged.
The moment came early in Mr Brown's speech when he was telling the conference: "It has been a privilege for me to work with and for the most successful ever leader and Labour prime minister." The news agency Bloomberg reported that Mrs Blair said "Well that's a lie," as she heard the chancellor's words on a big screen in the nearby exhibition centre.
The reporter, Carolin Lotter, gave a detailed account of how she overheard the comment, prompting a massive media stake-out of Mrs Blair at the conference hotel.
"She was walking through the exhibition centre where the screens are all showing the chancellor's speech," Ms Lotter said.
"Everybody was watching, everybody could listen to it. She was just walking past one of the screens when I heard her say 'Well, that's a lie.' I had to step out of her way or she would have run me down. She made the comment to no one in particular."
Seven hours later, Mrs Blair denied having called Mr Brown a liar, telling reporters: "Honestly guys, I hate to spoil your story, but I didn't say it."
Mrs Blair is known to be furious at what she regards as the chancellor's plot to force her husband to declare that he will give up the premiership within 12 months. One cabinet minister said: "It is tragic. I like both Tony and Gordon, and Cherie is acting out of misplaced loyalty."
The episode puts extra pressure on Mr Blair to heap praise on the chancellor in his speech today, but he is still expected to hold back from an endorsement on the basis that other cabinet members say a signal at this stage would kill the already slim chances of any challenger to Mr Brown.
Mr Blair will stick to his plan to tell his party that for Labour to secure a second successful decade, it needs to be more New Labour, not less.
He will say the hallmark of New Labour is "the courage to be fearless in the pursuit of the right answers, listening and learning beyond our party ranks in order to lead.
The core vote of this party is not the heartlands, the inner city, or any sectional interest or lobby. Our core vote is the country."
The row overshadowed Mr Brown's often personal and deliberately collegiate speech in which he set out his vision of a good society "based on a shared national purpose that can unify us all".
The chancellor received the loudest applause when he made his most direct pitch ever for the Labour crown, declaring that he would "relish the opportunity to take on David Cameron and the Conservative party".
He opened the speech by expressing his regret over the feuds with Mr Blair, saying: "It's hardly surprising that as in any relationship there have been times when we've differed. And where over these years differences have distracted from what matters I regret it, as I know Tony does too.
"I will never forget the only reason any of us are here is that we are in politics as servants of the people."
The chancellor also sought to highlight his record of substance, in comparison with the glitz of Mr Cameron. He said: "As a quite private person what drew me into public life was not a search for fame, or headlines, but a determination to make a difference.
"If I thought the future of politics was just about celebrity, and not about something more substantial, I would not be in politics. If being in public life becomes about image above all else then I don't believe politics would be serving the public." Patrick Wintour & Will Woodward/Guardian
Relations between Gordon Brown
and Cherie Blair have always been strained
And if Mrs Blair said what the Bloomberg agency insists she did, it reflected the anger of a woman who believes that her husband is more spinned against than spinning.
To Mrs Blair, Mr Brown is the neighbour from hell. The chancellor niggles the prime minister's wife by arguing over who gets how many rooms at 10 and 11 Downing Street.
Earlier this month she was appalled to be told that curtains, measured-up and ordered by the chancellor, had arrived at Downing Street.
She was also said to have been angered when Mr Brown was photographed outside Downing Street grinning from ear to ear amid demands from a group of MPs that Mr Blair resign his leadership. It is said that she was convinced that it was a publicity stunt set up by the Brown camp.
Perhaps more importantly, she is infuriated by what she sees as the sometimes Machiavellian plotting that goes on between Mr Brown and his allies.
The relationship between Mrs Blair and Mr Brown has long been an uncomfortable one and it is said the pair have not sat down together to dinner since 1998.
Upon moving into Downing Street, she is reported to have found Mr Brown's aide, Charlie Whelan, with his feet up on a sofa. "What are you doing in my house?" she demanded.
Fiercely supportive of her husband throughout his premiership, Mrs Blair clearly believes that in spite of his words in Manchester yesterday, the chancellor is not to be trusted: that he says one thing in public and another in private.
She is once reported to have demanded that Mr Brown: "Stop treating Tony with such rudeness." She does, it is said, get on with the chancellor's wife, Sarah.
In spite of her dislike of the chancellor, Mrs Blair attempted a reconciliation in public when she kissed him at party conference two years ago. The lines on his forehead marked his astonishment.
Observers yesterday said if the "lies" comment was true, it suggested how deeply Mrs Blair has been shaken by the weakening of Mr Blair by a party she wholeheartedly believed in.
Reports say that over recent weeks, she has constantly counselled her husband not to step aside in favour of Mr Brown.
The world of the gaffe is not new for Mrs Blair. She has strong views and often voices them forcefully, sometimes tending towards the indiscreet.
Some of the things that she has said are open to misinterpretation and she has been met with an often unsympathetic press.
She was criticised for signing a copy of the Hutton Report which was then sold at auction. On her first day as a criminal judge she was fined £10 for not having a train ticket.
In 2002, she apologised after saying that she had some sympathy with Palestinian suicide bombers.
And this summer, she made a joke about John Prescott's illicit affair with his secretary. She said: "The Cabinet is like an Ikea cabinet - one dodgy screw and it falls apart."
Mrs Blair has been pilloried because of her employment of and close relationship with the lifestyle and fashion adviser Carol Caplin.
Through this relationship she came to be involved in the Bristol flats scandal when she used convicted fraudster Peter Foster - Caplin's boyfriend - to negotiate the purchase of two flats.
She was forced to apologise and said: "I am sorry if I have embarrassed anyone, but the people who know me well know that I would never want to harm anyone, least of all Tony, or the children, or the Labour government."
Her husband and her family, it seems, are the most important things in her life. The next is her career as a barrister and her passion for civil liberties and human rights.
Mrs Blair's portrayal in Stephen Frears' recent film The Queen is said by those who know her to be incredibly accurate, showing the anti-royalist sentiment of a girl born into a working class, Catholic family in Liverpool.
At the beginning of her husband's premiership, Mrs Blair found it difficult to curtsy to the Queen. When she first met her, she did a sort of demi dip.
As the Blair premiership moves into its twilight, perhaps she could not contain her fury at the man she sees as Judas to Blair's Jesus.
Audrey Gillan/Guardian