The Prime Minister warned there would be no backing down on economic reform and spoke of the "burdens and responsibility" of government.
In his keynote address, Mr Blair pointed to Labour pledges that are turning the tide of rising hospital waiting lists and cutting class sizes.
Mr Blair said there would be an extra pounds 400m of National Lottery money for specialist health, education and environment projects and extra money would be used to launch a nation-wide programme to make Britain's cancer services "the best in the world".
There will be a further pounds 30m to modernise 50 accident and emergency departments next year and a new pounds 25m instant booking system for patients.
From next year, the Government would introduce long-term agreements for delivery of services, the first 24-hour nursing helpline and a new pounds 1bn information technology programme linking all hospitals and GPs.
We've done more than we ever promised and, where we have made promises, we are keeping them. Where we are accused of breaking them, it is over promises we never made," Mr Blair said.
He pledged that modernisation and reform would "equip our country for the future".
"This way we face the challenge together and, if the spirit of the nation is willing, it can make the body of the nation strong. One nation, one community, each and every one of us playing our part."
In a tough warning to teachers who were failing children, he said there were "too few good state schools, too much tolerance of mediocrity, too little pursuit of excellence."
He urged delegates, when the Government proposed fundamental reform of the teaching profession, to "help us get it through".
Why should not head teachers turning round failing schools earn pounds 60,000 or pounds 70,000-a-year, he asked? "But equally if they cannot run the school properly, they shouldn't be running the school at all. I say: work with us to get it done. Don't tell us we're unprincipled and unjust. For there is no greater injustice to inflict upon a child than a poor education."
Outlining his vision of the welfare state, Mr Blair listed a series of problems from "often chaotic and unfair" disability benefits" to an "out of date" pensions system.
But he pledged: "I did not come into politics to dismantle the welfare state. I believe in it ... so when we bring forward proposals for change in our Welfare Reform Bill in the coming Queen's Speech, don't tells us it is a betrayal of the welfare state when in truth welfare reform is its only salvation."
The Prime Minister went on to announce an agreement between police, car manufacturers and the Government on a target to cut car crime by 30 per cent over five years.
He added: "And when I announce today that we will be introducing - first in 20 of the worst crime hotspots then across the whole of Britain - targeted policing that has cut burglary in Huddersfield by 30 per cent and crime on one Leicester estate by 29 per cent, don't tell us it can't be done because some of you have been doing it already. Don't show zero imagination. Help us to have a zero tolerance of crime."
Mr Blair told delegates that strong family life was the "basic unit" of a strong community and the first Government Paper on the Family would put forward ideas to give practical support to parents and children, help in dealing with poverty, help in balancing work and family and action on domestic violence, teenage pregnancies and supporting marriages.
He said: "Accept that whatever our individual weaknesses, our collective strength lies in making the institution of the family work for the good of Britain."
On Northern Ireland, he said a lot was still left to be sorted out but insisted the Good Friday Agreement had proven that the "only road the people of Northern Ireland wanted to march down is the road to the future". "It is that same spirit of determination, and the power of the community, that should be the country's guide now in this year of challenge".
Mr Blair warned: "When you make reform, people will oppose you. They will stand up at public meetings and be applauded for attacking you ... some policies will attract attacks to the left of you, attacks to the right of you, attacks from behind and in front ... of course we'd rather be popular than unpopular. But better to be unpopular than wrong. And realise this."
The Prime Minister reminded delegates that in May last year the electorate voted for New Labour. "Loathing of the Tories was never enough for a landslide," he said.
"They wanted a new Labour Party. Not in the pocket of the trade unions. Not taxing them through the roof. Not chasing after every passing fad of the political fringe." Mr Blair added: "Yes, we are New Labour. But don't give me this nonsense that we're just a more moderate or competent Tory government.
" What Tory government ever put pounds 800m into our poorest estates in order to give them a future of hope?
"What Tory government would have raised Child Benefit by over 20 per cent? Or given free eye tests to pensioners? Or four weeks minimum holiday entitlement to Britain's workers? And what Tory government would have been prepared to increase by 25 per cent our spending on art and museums; not for what the sneer squad call luvvies, but because we believe art and culture are a liberating, wonderful addition to human experience and an integral part of the country we are creating."
Mr Blair went on to list the National Minimum Wage, backed up with the Working Families Tax Credit, trade union recognition and increase in overseas aid as key achievements of the Government.
He said: "Deny opportunity, leave injustice or discrimination unchecked and we lay waste the genius of the nation...when a young black student, filled with talent is murdered by racist thugs and Stephen Lawrence becomes a household name not because of the trial into his murder, but because of an inquiry into why his murderers are walking free, it isn't just wrong, it weakens the very bonds of decency and respect we need to make our country strong. We stand strong together."
Arguing for a more positive attitude towards the European Union, the Prime Minister hailed Gerhard Schroeder's election victory in Germany, adding that of 15 EU countries, 13 now had centre-left governments.
"Societies based on inclusion not division. Countries that are internationalist not isolationist ... this is the Third Way, our way of reconnecting people to political idealism in an age where political ideology is distrusted. It is no coincidence that the debates on devolution and Europe are happening together."
Prime Minister said across the globe nations were reshaping their identity as nation states and their future place in the world.
He stressed: "Of course we should be positive and constructive in Europe. Britain is stronger for it.
"Though Britain will take the decision on the euro in our own time and in our own national interest, meanwhile we work to make the euro succeed, prepare our business, educate our people and be free to join, if we wish to, if the economic benefits are clear." He added: "Sure, we have to reform Europe and we are winning that battle."
Mr Blair said when the EU helped Britain with trade, promoting prosperity, saving the environment, co-operating on cross-border problems like crime, it was doing what the EU should do.
But when it started interfering with every last detail of Britain's national life, "that's a Europe we can do without".
He insisted: "Decentralise where possible. Integrate where necessary ... we can play a leading role with others in Europe in getting reform. The others in Europe want us to. But we can't be leaders without being partners."
Mr Blair urged the conference not to fall for the myth about choosing closer links with the US rather than the EU because being stronger in Europe meant stronger with the US: "And the stronger we stand with the US the stronger the bridge we build between our European partners and our American friends," he said.
Reflecting on devolution, he emphasised that the "enemies of the Union are the advocates of the status quo and the separatists alike".
In a strong warning to the Scottish National Party leader Alex Salmond, Mr Blair said: "We have defeated the one and we will defeat the other. The SNP want Scotland wrenched out of the UK, and relations with England, can you believe this, run by a Minister for External Affairs, as if we lived on separate planets.
"Forget for a moment the threat to jobs, to industry, when 50 per cent of Scottish trade is with the rest of the UK. It is wrong in principle. It is the wrong values."
Mr Blair said that instead of solidarity, it was separatism, isolation. The SNP looked at England as the Tories looked at Europe.
"Enough of this narrow chauvinism masquerading as idealism," the Prime Minister said.
"Scotland stronger with England. England stronger with Scotland. Standing stronger together.
"That is how the challenge of change is conquered. Not by failing to make change, but by changing in a way that gives us strength for the future - when we have devolved power to Scotland, with proportional representation; to Wales, with PR; to Northern Ireland, with PR."
Turning to the contentious issue of election reform, Mr Blair sent a stern message to Liberal Democrat leader Paddy Ashdown, who called him a "control freak" in his conference speech in Brighton last week.
He joked: "Paddy, you've been in Downing Street often enough now to know that all major speeches have to be cleared through my Press Office. This one wasn't. So I declare it inoperative.
"I believe in the co-operation we have had between Labour and the Liberal Democrats. Where we agree - and there are many issues where we do - our politics should be grown up enough to say so."
He added that the forthcoming report by the Jenkins Commission on a new voting system for Westminster "should be listened to".
But he added: "Be assured. This government will decide on its response in the interests of the country, not in the interests of the Liberal Democrats."
The Prime Minister accused the Conservative Party, which has a three to one majority in the House of Lords, of arrogance.
Pointing to his willingness as Prime Minister to give up the sole power of patronage in appointing life peers, he said: "When we use the mandate the British people gave us at the ballot box to get rid of the power of those hereditary peers, I call that democracy.
"What is more, this supposed control freak will be the first Prime Minister to remove from himself the sole power of patronage in appointing peers."
The Prime Minister urged his party to look at Britain through the eyes of a child growing up today.
He said: They're anxious too. More anxious than we were at their age, and no wonder.
"More violence. More crime. Drugs. Families breaking down. The old moral order under strain.
"I want for my children the Britain that you want for yours. Of course I want them to be successful, and go on to make a decent living. But I want more than that.
"I want them to grow up in a country of which they feel proud.. I want to build for them a country in which their children can play safely in the park and can walk home at night without fear.
"A country in which every colour is a good colour, and every member of every race able to fulfil their potential.
"A country in which the sick are cared for, and the weak are tended by the strong.
"A country in which every parent treasures their children when young, and every child cherishes their parents when old.
"That is a country to be proud of. That is a community worth the name. As our children's prospects rise, so our country's prospects rise.
"As our children grow in confidence, so our country grows in confidence. As our country grows in confidence, so the challenge doesn't seem so daunting after all. By the strength of our common endeavour we achieve more than we achieve alone.."Reuse content