Lady Thatcher, whose verdict on her successor John Major has been lukewarm, said she believed that the Labour leader was sincere in his political message. She added: "I see a lot of socialism behind [Labour's] front bench, but not in Mr Blair. I think he genuinely has moved."
Although her comments fall far short of an endorsement of Mr Blair's Labour Party, they contrast with John Major's description of the Opposition leader as a "soundbite" politician. And her forthcoming book will implicitly accuse the Prime Minister of endangering Britain's future as a sovereign state.
Interviewed by the Sunday Times, Lady Thatcher responded warmly to Mr Blair's recently declared description of her as a "thoroughly determined person" whose emphasis on enterprise was right.
She, in return, paid tribute to Mr Blair's sincerity: "He says he believes the things he is advocating and I believe he does."
But she added: "It is all very well for their leader to say he agrees with Mrs Thatcher on many things, but those things would never have come about if Labour had had its way."
Despite her wider reservations about the Labour Party, Lady Thatcher's words will undermine Mr Major's attempts to rebuild his leadership in the wake of disastrous local and by-election results.
The former prime minister also entered into the debate over how the Tories should tackle the Blair phenomenon, arguing that they should exploit differences between the Labour leader and his backbenchers who "expect government expenditure to solve all problems - it's in their blood". She added: "I would have pointed out that contradiction most strongly."
Nor was there any comfort for the Tories in the latest extracts from Lady Thatcher's book. She said that when she left office, she "knew John Major was likely to seek some kind of compromise with the majority of heads of government who wanted political and economic union ... but I was not prepared for the speed with which the position I had adopted would be entirely reversed".
Lady Thatcher could not stay silent "when the whole future of Britain, even its status as a sovereign state, was at issue".
More ominously for Mr Major, she suggested that the British government should declare itself against a single European currency. She argued that, once an inner core of EU countries, entered the final stage of monetary union, forming an Ecu currency block, Britain would be under great pressure to maintain the pound's parity against the single currency. It would therefore have to follow Ecu interest rates but would lack a seat on the European Central Bank board that set the rates. "In these circumstances," argues Lady Thatcher, "the temptation for Britain to go the whole hog towards monetary union would be very great."Reuse content