Tony Blair is facing the most serious challenge yet to his leadership authority after rebel Labour backbenchers slashed his 176 parliamentary majority to just 40 over the crunch issue of welfare reforms.

In one of the most electrifying Commons votes since Labour came to power, around 65 Labour MPs defied the party line and threw the government's plans to cut disabled benefits into disarray.

Although the government narrowly won the day, the rebellion was far larger than last December's 47-strong revolt over cuts to single parents' benefits.

Welfare reform is at the heart of Tony Blair's vision for Labour

And it cast a long shadow over the future of Social Security Secretary Alistair Darling, whose attempts to see off the rebellion failed dramatically.

The revolt also came as a serious jolt to Labour managers who were already facing charges of incompetence after cutting short debate on the same issue at the beginning of the week.

It now seems certain that the Lords will kick out the controversial measure when it goes before them, leaving the government with yet another battle on its hands with disgruntled peers.

Lords' revolt

In what is likely to be the last significant act of the upper House before it is reformed, peers are determined to defeat the government's plans - and their hand will have been significantly strengthened by the Commons vote.

At the last count the Lords, led by former Labour MP Jack Ashley, were already planning to table at least ten amendments to the bill when it goes before them.

And within minutes of the Commons vote he made it clear he would attempt to overturn the measure in the Lords.

And that could see ministers locked into a long and damaging battle which will only serve to highlight claims that the government is targeting the disabled in its drive to save money.

The issue will also underline the deep divisions at the centre of the Labour party over the government's approach to welfare.

Tony Blair came to power pledging to reform the entire system and even appointed MP Frank Field to "think the unthinkable" over reforms.

But it soon became clear the issue was explosive and, more importantly, a vote loser and Mr Field was swiftly sacked from his job along with his boss at the department of social security Harriet Harman.

Piecemeal approach

Alistair Darling stepped into Ms Harman's shoes amid claims he would abandon any real radicalism and simply adopt a piecemeal approach based on saving money.

Welfare reform was always likely to be the biggest trouble maker for the government.

More than a year ago, 47 Labour MPs defied their leaders and voted against cuts in benefits to lone parents.

And, in one of the most embarrassing incidens to hit the government in its early days, disabled activists staged an angry protest against proposed cuts in their benefits outside Downing Street.

But those rebellions could pale into insignificance against the uproar the latest cuts are likely to produce.