The Prime Minister told his party he wanted to field the best candidates in the Scottish Parliamentary elections next year, which was seen as a clear warning that those who indulge in in-fighting will not be on the candidates' list.
"This isn't about stopping any particular person - it is about ensuring high quality candidates throughout Scotland. No one has an automatic right to selection. Scotland deserves the best from Labour at local and national level. That is what it will get," he said.
His remarks put question marks over some left-wing MPs who could be possible candidates for the Labour list, including Dennis Canavan, the MP for Falkirk West.
It is unclear how many Scottish Labour MPs will opt for the Scottish Parliament. Donald Dewar, Secretary of state for Scotland, is expected to run for the post of the first minister of the Scottish Parliament.
Henry McLeish, the Scottish minister responsible for helping to draw up the devolution plans, also announced this week he would be standing for the Scottish Parliament.
Mr Blair said the referendum on Scotland showed the settled will of the Scottish people and he described the elections as a "new dawn for Scotland", with a warning to the Tory hereditary peers in the House of Lords not to block the legislation.
The Prime Minister also set out his vision for a second term of office insisting that Labour's aims would only be realised on the rock of a sound economy.
"The rock upon which everything we do is stable prudent management of the economy," he declared.
He defended the reform of the welfare state, which includes the controversial plans to cut benefits to lone parents.
The Prime Minister said the Budget would push forward these reforms by promoting work and independence, insisting that could go hand in hand with compassion and social justice.
"New Labour is the party of economic competence in Britain today. It was never enough to say we were more caring and more compassionate, it is meaningless unless you deliver on the economy," the Prime Minister said.
"I want us to be the first Labour government in history to achieve a full successive second term in office."
But his message to the Scottish party was "keep the faith and we will win again", telling those present that government was a tough business and hard choices had to be made.
And joking about recent press reports that he was about to convert to Catholicism, Mr Blair urged the party to keep the faith then he joked: "According to the newspapers, I keep several."
In a wide-ranging speech, the Prime Minister also defended the proposals to charge students pounds 1,000-a-year to study at university, saying it would release much-needed resources for higher education and lift the cap on student numbers.
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