Iain Duncan Smith has challenged Tony Blair over his "politically obsessed chancellor".

Following Peter Mandelson's intervention, the Tory leader said the "words of his close personal friend show how vicious and personal this feud between them has become".

"The reality is that they are divided from top to bottom on the euro. Meanwhile 30 of his own backbench Labour MPs have signed up to a referendum on the constitution," said Duncan Smith

Demanding a referendum on the outcome of the Convention on the Future of Europe, the opposition leader said the prime minister "was frightened of giving the British people their say".

"The convention was not mentioned in the manifesto and therefore he does not have any mandate," added Duncan Smith.

Blair defended his decision to reject calls for a referendum and said he "did not need lessons from him [Duncan Smith] on splits on Europe".

"We do not need a referendum on whatever constitution comes out of the intergovernmental conference," said Blair. "The stories being told about what may be proposed in the convention or in the intergovernmental conference are wrong."

The prime minister said that changing the procedures of the EU would be "vital if a Europe of 25 is to function effectively".

Blair added that the Tories secretly wanted to leave Europe altogether.

"The true agenda of himself and many on his benches opposite is to get this country out of the European Union and that would be a disaster for Britain, British jobs, British business, British influence," he told MPs.

Duncan Smith said the prime minister "had done more u-turns that a dodgy plumber" on the question of Europe.

"The truth is that his party is divided on the convention, the constitution...as well as being divided on the euro," he said.

Charles Kennedy accused the prime minister of having been "boxed in" by the chancellor.

The Liberal Democrat leader goaded Blair over Mandelson's claims that Gordon Brown had outmanoeuvred him. "Will he take this opportunity to disavow him?" Kennedy asked.

He added that the government's euro policy was now characterised by the "dither and delay" which dogged John Major over Europe.

Blair refused to be drawn, arguing instead that the government should be "whole-heartedly committed" to Europe.

But he added that it would be "irresponsible for the economy" to advocate joining the euro regardless of outcome of the five tests.