Watch it, Tony, the Tories are following you!

It didn't make much of a splash. Tony Blair's big "what is new Labour for?" speech, at the London School of Economics, was originally dubbed a relaunch, an attempt to draw a line under the ghastly past few months. But then someone pointed out that only parties heading for the end have relaunches. John Major had about three a week in the dying days of his administration.

So this was most definitely, absolutely not a relaunch; instead, it was a straightforward attempt to remind the voters and the party what new Labour is all about. The answer was simple: values, values, values. A few Labour MPs were chortling: talk of values from a government that bends over backwards to help Indian billionaire donors to the Labour Party; a government whose Transport Secretary has admitted to being economical with the truth?

But let's be fair. Blair recognised that some people have a problem working out what new Labour is all about. "For many," he said, "the idea of new Labour remains controversial or unclear." There was a prickly admission that Labour is seen to be losing its way in what he called "the fog".

So, did Blair manage to steer us all out of the mist? For a start, he proudly declared that new Labour did not fit any mould and was never intended to. It was the SDP (the Social Democratic Party), remember, that set out to break the mould back in the 1980s. The SDP gang ended up breaking themselves instead. In ditching moulds, Blair consciously articulated the problem with new Labour: it is neither fish nor fowl.

The Prime Minister sees this failure to fit into a "left or right" mould as new Labour's great strength. But he has also clearly been stung by the accusation that this unmoulded party lacks shape and definition. The best question he has faced at Prime Minister's Questions in many months came from one of his own (un)helpful backbenchers, Tony McWalter, who asked Blair to explain his political philosophy.

Up until now, Blair has been for "what works". There has been a general, well-meaning sense of progressive direction. But there has been no ideology: if it delivers better health, transport, schools and so on, then he's for it. This is hard to argue with when everything is getting better. Some things still are: the Prime Minister was right to point out that the economy has been relatively well managed.

But now that so much is going badly - the delayed trains, the slow pace of change in the national health service, the mutinous teachers, the even more mutinous police - a government motto of "what works" suddenly seems risible, and more an admission of defeat than a philosophy.

Sensibly, Blair reminded us of new Labour's achievements so far. It is true - and is too seldom admitted by critics - that Britain has continued to change. The Prime Minister listed "all sorts of small ways" in which the country now feels different from "the harshness of the Thatcher years": from the banning of handguns and the equal age of consent to the trebling of women MPs and the first black ministers.

Blair's more interesting point was that new Labour has already created a new consensus in politics - that "the centre of gravity of British politics is moving in our direction". This is broadly true. Labour has quietly changed public attitudes on tax and investment in the public services.

But it is precisely the "new centre of gravity" in politics, celebrated so cheerily by Blair, that represents the next danger for new Labour.

Look back to the Thatcherite Eighties. Mrs T so changed the political framework that the idea of a workers' party, backed by strong trade unions and committed to pip-squeakingly high taxes, was not a viable electoral prospect. For a while, during her heyday, there really was no alternative. What happened? Labour moved in towards the centre, ditching its old nostrums such as taxing the rich and defending trade union rights.

Fast forward to the present day. Blair, like Margaret Thatcher, has completely changed the terms of political debate. A hard-right, invisible-state, ultra-low-tax and anti-Europe party is now just as unelectable as Michael Foot's Labour was in the 1980s. So what has happened? The Tories are galloping back towards the centre ground at a breathless pace. Iain Duncan Smith talks of nothing but the public services; the shadow home secretary is very struck by that thing called society; the shadow chancellor is falling over himself to agree with Gordon Brown, most recently on his decision to grant independence to the Bank of England.

The Tories, in short, are reshaping themselves in the centre ground. If Labour fails to reform the public services, then, for the first time in ages, they may find themselves up against a plausible Tory party that does not scare moderate voters. Blair declares proudly that "success in politics is not changing your own party; it is changing the opposition". Well, he's done that all right. So far, Duncan Smith does not look like a lethal opponent, but the Tories in general are looking a bit more serious: the old jibes about how loony they are don't have the bite they had a year ago.

Very soon, it will not be enough to talk about values. Blair is going to start needing results. And the real story of Blair's speech at the LSE is that the government is going through a major wobble as ministers wonder whether they will be able to deliver after all. One minister close to Blair told me mournfully that the political failures of recent months marked "the beginning of the end" for new Labour.

Things are not that bad, not yet. But the Prime Minister does not have very long to wipe away the current mood of disillusionment with the state of public services. He seems to sense this.

What Blair's speech at the LSE has shown is that, if he does not deliver concrete results, he has very little philosophy to soothe us with instead.