Politics - John Kampfner sees a return to the domestic agenda

The political spotlight has moved from Iraq to public service reform, and the government is talking

Tony Blair has pencilled in the third week of June next year for the general election. According to those in the know, Labour calculates that it has a good chance of saving at least 18 vulnerable seats. On Iraq and tuition fees, in areas where students are concentrated, Labour is under threat from the Liberal Democrats. But once those students return home or go on holiday, their votes will be dispersed. This latest thinking gives the government exactly one year to present its case, starting now, with an intensive month of announcements on public service reform.

The mood in Downing Street is slightly more relaxed. The Prime Minister's people do not believe the crisis brought on by Iraq is over - hardly surprising, with Lord Butler's report, the transfer of sovereignty in Baghdad and several difficult by-elections looming - but they are relieved that attention is turning to the domestic agenda.

Blair has taken to describing his "choice" agenda for the health service as a "Copernican revolution". But, for all the rhetoric, the changes on offer at the moment are more limited than either proponents or opponents would admit. The right of patients to decide between five or six hospitals applies only to elective surgery, a small part of health service work. It was first announced two years ago, and will come into effect only at the end of 2005.

Success will depend in large part on the highest-paid official in Whitehall, the NHS's head of information technology, Richard Grainger, whose task is to provide GPs and their patients with immediate and comparative information on their computers about hospital availability, waiting times and surgeons.

With the debate in danger of turning into an auction on choice, Blair's instincts are to match Michael Howard in his enthusiasm for attacking the "monolithic" nature of the NHS.

The argument in the Treasury is that choice is no panacea. As James Strachan, the head of the Audit Commission, argued recently, choice can prove economically inefficient because widespread choice would require impractically high levels of resources.

Gordon Brown is not kicking up rough because he knows that for the foreseeable future the debate remains theoretical, and as long as it can be framed in the context of reducing waiting times and as long as it does not impinge on the bigger question of investment, it is politically sellable.

The relationship between Brown and John Reid, the Health Secretary, is currently described by both sides as tolerable. With health funding levels fixed for five years in the last Comprehensive Spending Review, the Health Department and the Treasury have not had to do battle. Brown sees little to object to in Reid's NHS improvement plan.

Although Reid's allegiances are with Blair, he has been careful to keep on the right side of the Chancellor. That may have something to do with the disappearance of his seat in Scotland. He needs Brown's support to lever him into the comparatively safe constituency of Airdrie and Shotts, to be vacated by Helen Liddell.

Reid has become an ardent proponent of choice - or individualisation or personalisation or patient empowerment (his favourite description) - but he is aware of its limitations. Yet, as he would admit, real empowerment means more than giving patients a list of preferences for treatment. It means transforming the relationship between doctors and patients, which many in the medical profession remain opposed to. In light of the medics' reluctance, politicians have resorted to the mechanistic options that have dictated health policy for decades. Hence, "our restructuring is more fundamental than yours . . ." and so on.

Blair has asked his two ex-cabinet confidants, Stephen Byers and Alan Milburn, to come up with "the big idea" for public sector reform for a third term. Some of that may involve co-payments, requiring users to pick up the tab for all or part of certain services. The Treasury is looking on suspiciously.

The big ideological battle remains for the future. The smaller battle about election strategy is about to start. Many around Blair believe that relying on Labour's record for delivery is not good enough. Focus groups and opinion polls show that public confidence in the use of taxpayers' money to engineer change in the NHS reached a low last autumn. Since then, it has steadily improved, but it is still "below the line".

The Blairites say the government needs to show an enthusiasm for "perpetual" reform, that posters pointing to waiting times coming down from 18 months to 18 weeks will not do the trick. Brown is more comfortable confronting Howard's central charge, that huge tax-funded investment has failed to bring about the promised transformation.

Ultimately, it may come down to confidence in the public sector. Brown, so far, has not complained of scars on his back.