Second term blues may give Brown his chance

`The euro is the joker in the pack which has the potential to be Mr Blair's Ides of March'

THE BROWN-BLAIR feud story is like the little black dress on the catwalks: a classic staple which changes form to reappear every political season and never becomes extinct. This autumn it appears in the following form:

Tony, we're told by aggrieved supporters of the Chancellor, reassured Gordon that he intended to stand down in the middle of the second term. On their version, the conversation after John Smith's death went like this, Tony: "Look Gordon, sorry to shaft you this time round. But you can take over - ooh, let's say in 2003 or so, OK?" "Done," says Gordon. Now Tony is reneging on the agreement. He has let it be known through no less an agency than his official spokesman that he intends to serve two full terms and may even do a Maggie and embark on a third.

Certainly, Mr Blair must have authorised the announcement that he is there for the duration if elected next time round, quashing any precipitous leadership moves by his Chancellor.

It is far more dubious whether any treachery took place. Ask yourself these questions: does Mr Blair look like a man who ever intended to be a one-and-a-bit term prime minister? Can you imagine him standing down in the middle of an electoral cycle to become Lord Blair of Sedgefield, Britain's European Commissioner or just the suave head of a few quangos: an elder statesman by the time he reaches his 50th birthday? I think not.

Tony Blair is the most driven figure in British politics since Margaret Thatcher, imbued with a strong desire to change the Britain he inherited in 1997. Unlike the resigned character in the Billy Bragg song who didn't want to change the world and wasn't looking for a New England, he is very definite about looking for a New Britain. He was not daft enough to think that this can be achieved quickly and has always said that he needed two terms to deliver on his promises to refashion substantially the blighted education system and improve the quality of the public services.

This week, as the Labour party marks the centenary of its founding, the gloomy purveyors of party pathos will complain that he is alienated from Labour's roots and lacks due reverence for its achievements. In fact, Mr Blair is more ambitious for his party than those who claim to be its guardians. He wants New Labour, not the Tories, to fulfill Harold Wilson's premature prediction in 1964 that Labour would become the natural party of government and not simply another interlude allowing Conservatism to mutate, regroup and return to the helm. He has a superstitious fear of failing to complete two terms of government. People with such demons to exorcise are not inclined to give up half way through.

That does not mean that Mr Brown has any reason to see things the same way. The fact that Mr Blair has led a charmed political life so far is no guarantee that this will continue. A joker lurks in the pack of expectations, namely the euro. The single currency has the potential to be Mr Blair's Ides of March. If he holds the referendum and loses, he will be finished.

Unthinkable, say the aides: "Tony will only call a referendum when he knows he can win it." But even if Mr Blair's instincts on this score prove faultless, his success in the wake of a "yes" vote is far from assured. Entering the euro-zone consigns Mr Blair to the first major shift in the United Kingdom's circumstances over which he has no control. That is why his shrewdest adviser on these matters, Alastair Campbell, has remained sceptical about the idea.

None of us, EMU-sceptic or Euro-phile, knows what state the single currency will be in five years' time and whether it will live up to the promises made on its behalf, or live down to the concerns of the doubters. We do know that the British economy is not converging with the other main European economies and that there is no immediate prospect of it doing so.

The Chancellor's early enthusiasm for entry was based on his naturally pessimistic but not unfounded fear of being blamed and politically destroyed, in the manner of Nigel Lawson and Norman Lamont, if things went wrong with the economy. To his surprise, they are going far more smoothly than expected. Success has many fathers: failure is an orphan. Mr Brown is determined to prove paternity of the UK's blessed fiscal and economic state and disinclined to risk any change which would endanger his reputation as the man delivering the triple blessings of solid growth, low unemployment and low inflation. Hence the reported cooling towards the single currency.

People often ask whether these shifts are "for real", as in, "Has Gordon really changed his mind about the euro?" It is the wrong question. With the exception of a few strong believers, like Peter Mandelson and some opportunistic enthusiasts like Robin Cook, most senior figures in the Government do not have a settled mind about the single currency to change. Their main worry is how to make the best calculated response to it which will not leave them vulnerable.

This is where Mr Blair and Mr Brown part company. The Prime Minister, by emphasising a generally pro-euro stance without ever quite coming out with a solid statement of intent on when Britain should join it, believes that being left out carries the greater risk because it would isolate him among the family of European leaders, and that his best option is to try to steer public opinion into a more positive state of mind.

Mr Brown, who does not have to worry about the leader bit, at least not yet, is taking the opposite view - that any intention of Britain joining in the next term will endanger the UK's rosy economic prospects. He is concerned about the deflationary consequences and adverse affects on growth of trying to ram the UK into an unsuitable convergence with the main European economies at a time when their prospects are less hopeful than ours.

He also praised the Bank of England for raising interest rates to choke off a housing boom - the same sort of boom likely to result from the lowering of interest rates necessary to align Britain with the euro-zone. Unkinder souls might find this a bit inconsistent given that in his most ardent pro-EMU phase last year, Mr Brown was fond of praising the euro as the harbinger of cheap mortgages: indeed, I have the indelible memory of him reassuring a prettily flustered Ulrika Johnson on this score in a programme devoted to the benefits of EMU.

But that was then and this is now. Mr Brown is in the enviable position of having both sound economic and sound personal reasons to distance himself from the dash towards the euro. Picture a referendum which does not go according to Mr Blair's plan, or one which is won only to be followed by bad strains in euroland and subsequent damage to the British economy. Mr Blair, champion of EMU, would not look so invincible then. But Mr Brown would be seen as the Chancellor who sounded the right warnings. Not a bad basis for a leadership challenge.

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