The most common and most likely answer to this crossword clue is the 4 plus 3 plus 7 letter word NEAR THE KNUCKLE
I've seen this crossword clue in The Daily Telegraph
N
E
A
R
T
H
E
K
N
U
C
K
L
E
More clues leading to the result NEAR THE KNUCKLE
Buddy explains!

The straight part
We know that "a little blue" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case a little blue = near the knuckle.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.