Derek Scott, who has died from cancer aged 65, was a former economic adviser to Tony Blair in Downing Street and a first-hand witness to the obstructive and challenging attitude displayed towards the then prime minister by Gordon Brown as chancellor. What made Scott's position unique was that more than 20 years earlier, he had been special adviser to Denis Healey when he was chancellor and witnessed his relationship with James Callaghan at No 10.
In his book Off Whitehall, published in 2004, a year after he left Downing Street, Scott wrote a chapter on Blair and Brown's explosive relationship, providing one of the most revealing accounts of the damaging schism at the centre of the Labour government. Describing his earlier experience, however, he wrote: "Callaghan and Healey generally got along well with each other and, as the latter's special adviser, my relationship with my opposite number at No 10 was one of genuine mutual trust and openness without in any way diluting our respective obligations to our political bosses."
The publication of the book was much criticised, since it came from someone who had left the political stage for a lucrative career in the City. It played into the hands of the media with a number of fruity new examples of the degree of dysfunction within the government, yet Scott's main aim had been to write about the politics and economics of the European Union, and to draw attention to the dangers of economic and monetary union and the single currency.
His problem was that he could not do this without exposing his insider's account of the interaction between Blair and Brown on such a significant issue. It is a cruel irony from which he would have gained no satisfaction that it was only in the last months of his life that Scott was proved profoundly correct in the warnings he offered of the dangers the Euro posed to the financial and political stability of Europe – with particular reference to the possible need for other member states to bail out Greece and Spain.
The episode is, in its way, characteristic of the man. Scott held forceful opinions that he did not keep to himself in the manner of a more subtle political strategist. He was not a tolerant person who was prepared to accept a political position with which he disagreed for the sake of his own future. Probably in consequence, he sacrificed his dearest ambition for a political career of his own as an MP.
He had perfect credentials for a potential Labour MP, having worked for a trade union after university and followed his first stint at the Treasury by working as economic adviser to Callaghan after Labour lost office in 1979. He had earlier spent four years on Kensington and Chelsea council from 1974, when he and I were elected as the two Labour members for Kelfield ward in deprived North Kensington.
He was intelligent, handsome, personable and unstinting in the time he was prepared to devote to politics. But the Labour party was increasingly riven by the political infighting of the period, and while Healey successfully persuaded Scott on one occasion not to leave Labour for the Social Democratic party, he eventually rejected this advice despite his respect and admiration for his former boss.
He fought Swindon for the SDP in 1983 and came a respectable third, but in doing so deprived the long-standing Labour MP David Stoddart of the seat, which went to the Tories. He made a second attempt in Swindon in 1987, but left the SDP when it merged with the Liberals, and by the early 1990s he was once again a Labour party member. His official rehabilitation was marked by a telephone call from Peter Mandelson in 1994 offering him the economic post, with Blair as the new opposition leader.
By his own account, Scott remained an outsider in Blair's entourage, however, and inevitably found many of his former Labour friendships difficult to maintain; nor did his continuing pursuit of a parliamentary seat prosper. In 1997 he lost the Pontefract selection that went to Yvette Cooper – with whose husband, Ed Balls, he then spent the next six years in direct confrontation.
Scott was the son of John, a jeweller from Bromsgrove, Worcestershire, and his wife, Alice. He left school without A-levels to work in the family business but, realising he had made a mistake, resumed his education. He went to Liverpool University and subsequently took two master's degrees in economics at the London School of Economics and Birkbeck College, London. He was a football enthusiast, who supported Aston Villa and played for the Guardian team in the 1970s.
In 1985 he married the political journalist and broadcaster Elinor Goodman. They divorced in 2007. In 2010 he married Gisela Stuart, the Labour MP for Birmingham Edgbaston, with whom he had worked increasingly closely on their shared antipathy to further European integration.
Gisela survives him.
• Derek John Scott, economist and political adviser, born 17 January 1947; died 1 August 2012
