The Secretary of State for Education and Employment seized on an unexpected sharp drop in the jobless total to a new 19-year low, saying he wanted to see unemployment fall to levels not seen since end of the Second World War.
"I am confident that we can move ever closer towards our goal of full employment in the new economic environment," he said. "Unemployment remains high by initial post-war standards, and there are many inactive people who can still be brought into the world of work. I will not be satisfied until we reach those post-war levels again."
The use of the phrase "full employment" is a marked shift. Persuading Labour to drop the pledge was one of Mr Blair's first achievements as Neil Kinnock's employment spokesman. New Labour's manifesto commitment now is to achieving "high and stable levels of employment".
The Tories seized on Mr Blunkett's comments as proof that Old Labour values are alive and well within the Government while Tony Blair and Gordon Brown are on holiday.
John Bercow, shadow Employment minister, said Mr Blunkett had no evidence the goal would be achieved. "It is clearly in conflict with the traditional Treasury view and shows the fissures that still exist within the Cabinet.
"David Blunkett is a traditional socialist and is using these figures to change the Government's objective. It is dangerous in the extreme to use good news to raise expectations which are not likely to be achieved."
Steven Bell, an economist at Deutsche Bank, said: "I find it inconceivable that anyone in the Treasury would have allowed the words 'full employment' to have got past them."
The TUC welcomed the statement, which is in line with its own policy. Its general secretary, John Monks, described the figures as "welcome news", adding: "They show the economy has avoided recession and that the New Deal strategy is working."
The public sector union Unison, which is headed by the TUC's chief economic spokesman, Rodney Bickerstaffe, backed the Government. "It is very encouraging to hear them talk about full employment."
Official figures showed the number claiming benefit fell by 32,900 in July, taking the jobless rate to 4.3 per cent, a new 19-year low. The number in employment rose to 27.39 million or 74 per cent of the workforce - a nine-year high.
By 1965, unemployment had fallen to 2 per cent - so the percentage now out of work would have to fall by more than half to hit Mr Blunkett's target. That would put ministers on a collision course with the Bank of England.
"We are OK with further falls in unemployment," Jonathan Loynes of HSBC said. "But there's a limit and it can't go on for ever. I expect a fall to 2 per cent would ring alarm bells at the Bank."
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