Tony Blair: now for the relaunch

If Iraq was his Falklands, the PM still awaits his Scargill. All pockets of resistance are to be cru

Tony Blair would not admit it, he might not even know it, but he has Jacques Chirac to thank for transforming him as a politician. It was when the French president popped up on television nine days before the war in Iraq began and said "non" that the Prime Minister saw, in adversity, the need to reinvent himself from a conciliator to a leader. This process is only just beginning. Its consequences are yet to be determined. But "Blair: the relaunch" is taking place.

Over the next few weeks, as he returns to a dreary domestic agenda, devoid of the clear targets of war, Blair faces a series of decisions that will prove the extent of his professed new radicalism. From foundation hospitals to schools, from university funding and the role of the access regulator to the welfare state, from an Olympic bid to the euro - Downing Street wants to accelerate the pace of change.

It sees - in much of the public sector, most of the trade union movement, some professional bodies and parts of Whitehall (for that read the Treasury) - "pockets of resistance" to be overcome. The dragons to be slain may now be different, but the war message elides effortlessly into the peace message. If Iraq was Blair's Falklands, he now awaits his Scargill.

Blair's appearance before the media on 28 April was reminiscent of a speech he made to the Labour Party conference in October 1999. Then, he was impatient for change. But his exhortations to root out "forces of conservatism" across the country fell flat. His impatience has become considerably greater. So, thanks to Iraq, is the readiness to make and take on enemies.

This is a man who has made his career in contra-distinction to the party he leads. He is confident that critics of his plans for the public services have nowhere else to go. "Our big problem is with the progressive, largely middle-class vote, which feels alienated," says one member of the cabinet. "We've taken a big hit there, but it doesn't matter as much as you might think." These people might dabble with the Liberal Democrats, they might stay at home for a while, but if the Tories ever became a serious threat they would reluctantly come back into the fold. Now, for the first time since 1997, Blair feels that the "soft Tory" voter is toying with the idea of backing him.

The first post-Iraq battle will be joined within days. Even during the war against Saddam Hussein, Blair took time out to try and convince restive backbenchers that his plans for foundation hospitals did not spell the end of the NHS. According to those present, most of the MPs who attended the softening-up exercises in Downing Street and at the Department of Health came out angrier than before. Alan Milburn, the Health Secretary whose pugnacity has endeared him to the Blairite vanguard, is embarking on a series of speeches to show the Labour heartlands that none of this amounts to creeping privatisation or to a two-tier system. At the same time, he will announce which of the 32 "three-star" hospitals will be granted their new autonomous status. Blair, meanwhile, told the Parliamentary Labour Party on 30 April that his plans were misunderstood, but, to borrow the phrase of a certain mentor, there is no alternative. The scene is set for a rebellion when the bill is debated in the Commons on 7 May. Roughly 130 Labour backbenchers have signed a motion opposing the plans, but the new, leaner and meaner Blair has made it clear to his confidants that he will go to the wire on this.

Over the road at the Treasury, scepticism has never been greater. Gordon Brown's people see an inherent contradiction between the radicalism of foundation status and the promise that within five years all hospitals will be eligible for it. What is the point of creating an elite club if everyone can join? But that is detail. More important is the philosophical divide between the more traditional Labour approach to universal provision, represented by Brown, and the Blair view that sees equality of provision in public services as a chimera. The buzz-phrase is "earned autonomy".

The Brownites see foundations as a distraction from the harder task of delivery. The government, they say, should be guided by two clear goals for the public services - to ensure the money is well spent and to reinforce a clear dividing line with the Conservatives. They draw a parallel with the war. Just as the UN inspectors were written off almost as soon as they had landed in Baghdad, so, they say, the basic thrust of the comprehensive spending review is being dismissed even before it has had time to work. Why assign billions of taxpayers' money - at considerable political cost - to improving schools and hospitals if you are not prepared to give the money the time to deliver improved outcomes?

But the row over the shortfall of funds to schools has played into the hands of those who say that, as with NHS trusts, local education authorities squander the cash even before they have had time to spend it. One solution actively considered from the drawer marked "radical" is in effect to dismember the local education authorities. Charles Clarke, the Education Secretary, has hinted as much in recent days. Ideally, those in the Downing Street Policy Unit would like to reduce the role of the LEAs from mainstream funding bodies to little more than co-ordinators, with responsibility for issues such as special needs.

A further battle looms over higher education funding. Clarke removed the earlier compromise proposal for an access regulator - Oftoff, as it was dubbed. The new idea is for a "lighter touch", for someone to monitor the universities' admissions procedures from the sidelines. Brown is still holding out for something stronger, with powers to punish transgressors. Clarke, Milburn, their ministers and officials are now meeting regularly to discuss the reform agenda. This axis has a very sharp political, as well as policy, edge, and those involved are keen for Brown to take heed.

Around the cabinet table, after the postwar opinion poll surge for Blair, ministers have been offering themselves up in a loyalty-fest. From Jack Straw to David Blunkett, they have clambered on to the "I would have resigned with Tony" bandwagon. Journalists have been similarly obliging with hagiographies. All that will pass, as the more savvy members of Blair's entourage know too well. They will need to keep up a constant diet of delivery spiced with "good news" stories. One to watch for in the coming days is the decision to go ahead with a bid for London for the 2012 Olympics, something for which Tessa Jowell is pushing hard. Blair wants to keep up the momentum.

Where does all this leave Brown? People around Blair do not discourage stories that Brown's time as a possible leader has been and gone, that he will enjoy a spell as Foreign Secretary, before being put out to pasture at an international institution. Chirac's experience provides a further pointer. It was only when he broke free from cohabitation with Lionel Jospin that he could really begin to assert his authority. Blair would love to do the same, by removing the constraints that Brown's presence has always imposed.

Blair's reshuffles have always defied prediction, so nothing should be ruled out. His aim will be to "think big", but which pieces of the jigsaw can he actually rearrange? Candidates for removal are Derry Irvine and the war-damaged Clare Short (who along with Blair and Brown are the only ones in their original posts since 1997). Possibly, just to annoy Brown, No 10 might have a go at getting rid of one or two of his remaining allies, such as the quiet Andrew Smith. But there would certainly be some ribald amusement at the idea of Brown, who likes to get the first plane home from international forums, spending more than half the year acting as his boss's emissary in places such as Islamabad and Doha.

Yet, whatever gossip the PM's people encourage, the dull reality is that, having at the last minute settled on Jack Straw in 2001 precisely because he is a safe pair of hands with no separate power base, Blair wouldn't risk his foreign policy by appointing Brown.

The two protagonists are now putting the finishing touches to the euro statement, expected in mid-May. Brown is determined to write every word himself. The tension is over the wording of the "not now" - how firmly to stipulate a date for revisiting the five tests. Blair's people want to keep it vague, to leave the door open for another look in spring or autumn 2004, or even spring 2005, if an election is held off until 2006. Brown wants to rule out the euro for a fixed and longer period. The outcome and tone of their discussions will determine Brown's fate and the direction of the government.

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