In a defiant new year's message to his backbench critics, he says he will not duck the difficult decisions required in 2006 to boost public services.
The Prime Minister faces a torrid few months to win support for plans to hand more freedom to individual schools, reorganise local health care trusts and an expected decision to build a new generation of nuclear power stations.
There is also unease over an imminent overhaul of incapacity benefit, while the Government will shortly set out proposals for heading off a potential crisis over the state pension.
Mr Blair, who is on a short holiday in Egypt, becomes the 10th longest-serving prime minister in British history today.
He shows little sign of being prepared to make concessions over the Government's flagship legislation as he says: "We face big choices which will decide how prepared we are for the challenges of the future.
"In public services like education and health, the challenge will be to ensure continuing investment is matched by greater responsiveness to the needs of the people who use and pay for them. Investment will continue, but it must be matched by further change to meet the ever higher expectations of the public."
Mr Blair says decisions that will affect "the prosperity and security of the people of Britain for the next 50 years" - over welfare reform, pensions and energy - must be got right.
"None will be easy - all will have to balance what is best for the future of the country with what is affordable now. But in each case, the decisions taken will affect the future for generations to come." He confirms a fresh action plan on antisocial behaviour will be published in January to crack down on the "problem families who do so much to damage communities".
Mr Blair says that Britain will continue to do its part to "fight terrorism and bring democracy to Afghanistan and Iraq". He adds: "We will not let our resolve slip to tackle the dangers we face, both at home, as so tragically illustrated on 7 July, and abroad."
Meanwhile, Mr Blair's new opponent David Cameron quoted Mahatma Gandhi as he urged the Tory Party to develop a new brand of "constructive, thoughtful and open-minded" politics.
The Conservative leader said the party could look forward to the next year with confidence and optimism.
"We're at the start of a process of change, becoming a party which is more like modern Britain and which likes modern Britain more," he said in his new year's message. "As the world is changing, so must we. Our central objective in 2006, as a modern, compassionate Conservative Party, is to apply all our energies to tackling the big long-term challenges faced by Britain and the world.
"I want us to usher in a new type of politics in this country: constructive, thoughtful and open-minded. And I want every single member and supporter of the Conservative Party to remember personal commitment is the most powerful way to bring about change. As Gandhi said: 'We must be the change we want to see in the world.'"Reuse content