Iain Macwhirter on the PM

After much deliberation, Gordon Brown's answer to the crisis facing thousands of households this winter is: loft insulation. So much for the grand talk of an "economic recovery package".

The latest Brown relaunch has turned into a presentational disaster, throwing public money on a collapsing housing market and denying hope for people struggling to pay heating bills. It's another fine mess.

Now, older readers may remember the brilliant political strategist and architect of New Labour, whose command of economics was unparalleled and whose media skills had been honed to perfection in the years of opposition. Now look at Brown: a shadow of himself, a hangdog caricature of the dour Scot. His rhetoric is leaden and bureaucratic; his policy initiatives timid and confused; his authority openly flouted by ambitious insiders like David Miliband and cantankerous renegades like Charles Clarke.

Can this be the same Brown who took the country by storm in 1997 - "liberating" the Bank of England from political control; imposing a swingeing windfall tax on the utilities to finance his new deal for the unemployed; introducing a tax-credit system to ensure that working families would be freed from poverty; devising a range of exotic "stealth" taxes to redistribute wealth painlessly; and eventually increasing national insurance to finance the modernisation of the NHS? Not everyone might have agreed with his politics, still less his economics. But you had to admire his presentational genius, his effectiveness, his command of the political moment.

Now he seems to be running on autopilot while minions put together botched relaunch packages by committee. Where is the leadership? Brown passes through world events like a cardboard cut-out - present for the official photographs but otherwise absent; a politician with nothing memorable to say about the great issues of the day. That's been left to the chancellor, Alistair Darling, who repeated his long-held view that we could be entering the worst global financial turbulence in 60 years. Economists may disagree, but at least the chancellor is trying to make sense of events.

So, where is the Brown who used to command the attention of the world's leaders at G8 meetings with his pronouncements on the global economy? Who used his authority to devise a strategy to make poverty history in developing countries at the Gleneagles summit? Who salvaged Labour's 2005 general election campaign after his great rival, Alan Milburn, crashed and burned as campaign director? Perhaps the PM has been afflicted with some obscure malady which has robbed him of his personality; perhaps he is just exhausted by all those 18-hour days. It is a personal tragedy that has huge political implications.

Clarke's claim last week that Labour was "destined to disaster" unless it changes its leader was only a statement of the obvious. Note how few Labour figures of any substance defended Brown against this assault, which has just been left hanging in the air. Ministers just don't want to know. MPs are in mourning. The "West Wing" crowd who staff the prime minister's office seem to have lost the plot totally and spend most of their time fighting among themselves. Can there ever have been a greater sense of defeatism in Labour than now? Not even during the Winter of Discontent under Jim Callaghan in 1979, when the Tory vandals were at the gates and the dead were going unburied and rubbish piled up in the streets, was there such a sense of hopelessness in the Labour movement. Brown has united left and right in their collective despair.

He has also breathed life into the moribund Conservative Party, turning a shallow and discredited David Cameron into a credible candidate for prime minister. Only a year ago, the Conservative press had all but written Cameron off as a lightweight media spiv. Now look at him. The Tories have had a double-digit lead over Labour for six consecutive months. They are running 20 points ahead - enough for a landslide victory of 400 seats. It is almost impossible for Labour to recover in time for the next general election.

But that doesn't mean they shouldn't try. Even if Labour loses the next election - and maybe with the economy as it is the next election might be a good one to lose - they have to be careful not to lose by a landslide that will condemn them to opposition for a generation. If Labour got their act together they could hand over to Cameron, watch him flounder in the recession, and then be back in power within four years. Labour MPs know this perfectly well. But it looks as if they have lost the will to live. Otherwise, they would have heeded the message of the opinion polls and the Glasgow East by-election and forced a change at the top. Yes, the Labour Party really must put sentiment aside and try to find it in itself to address its leadership deficit.

It's not going to get any better. The energy package has shown the prime minister at his dithering worst. All the talk of fuel payments and carbon levies rashly aroused expectations which have been dashed, while Brown failed even to express justifiable public outrage at the naked profiteering of the energy companies. The best that can be said about the housing measures is that they will probably have no impact at all. But the stamp duty "holiday" will only encourage young families to buy houses just as prices are collapsing. When they find themselves in negative equity in a year or so, who are they going to blame?

Brown is supposed to be at his best on his home patch: Scotland. And last week he did try to come to terms with political reality by accepting that the Scottish parliament should have greater tax powers. But he gave no convincing account of why he had changed his mind since the Holyrood election last year. Wendy Alexander has particular cause to be aggrieved, since it was the prime minister's dithering over the Calman commission and her call for an independence referendum which destabilised her leadership.

Brown is heading for an epic defeat in the Glenrothes by-election - the third crushing reverse in a row. Even he must realise that it's all over - but in his present debilitated state is too much to expect him to go quietly. Labour have a choice to make in the next fortnight as they prepare for their conference: do they take responsibility for the future and change, or to they stick to the bitter end with a lost leader. Their decision could decide the course of British politics for a generation.