UPDATE : It was Bloomberg’s Carolin Lotter who overheard and first reported Cherie’s comments. Bloomberg has been given the Labour party media machine’s full-on expletives-not-deleted attack in an attempt to force a retraction. None is forthcoming and Bloomberg are standing by their story despite denials from spokesmen. A second story clarifies the exact circumstances:

Mrs. Blair left the conference hall with her security detail as Brown was speaking to the Labour Party conference in Manchester, England. As she walked through a display area outside the auditorium, Brown was on television monitors, extolling the strength and achievements of his relationship with Blair. “Well, that’s a lie,” she said, apparently unaware that she was within earshot of a Bloomberg News journalist.

A spokesman for Blair said the account of his wife’s comment “is completely untrue. Mrs. Blair was going round the stalls at the conference center when the chancellor began speaking, and she went immediately to the stall organizer’s office to watch the remainder of the speech on TV. She certainly didn’t say that.”