Brown to stay Chancellor after being hailed as best in 100 years

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Tony Blair hailed Gordon Brown as "the best Chancellor this country has had for 100 years" in a move that will squash speculation he intends to move him from the Treasury if Labour wins a third term.

The Prime Minister told the Scottish Labour conference in Dundee yesterday: "We have shown that when it comes to economic competence it is New Labour not the old Tories who have the right stuff. This is the biggest single strategic shift of my political lifetime. Through Gordon's sound management, we have put the Tory years of boom and bust behind us, and provided, on a sustainable basis, for the investment now going into our public services."

Allies denied his remarks were a deliberate hint that he would keep Mr Brown at the Treasury. There have been reports that Mr Blair may ask him to become Foreign Secretary. But Labour MPs believe he is unlikely to shift Mr Brown after such effusive praise.

Blair aides said the two men worked closely in advance of the conference to co-ordinate their speeches and agreed to make the economy and public services their main theme. Insiders saw this as a thaw in the recent frosty relations stemming from Mr Blair's decision to put Alan Milburn in charge of Labour's election campaign, which was headed by Mr Brown in 1997 and 2001.

In his speech, the Prime Minister appealed to progressive voters, many of whom opposed the Iraq war, not to desert Labour for the Liberal Democrats. "The fight is on," he said. "It is a fight for the future of Britain. A fight between 'us' and 'them'. Labour and Tory. That is the choice in the end. There are other parties ... but only two that can form a government, Labour or Tory."

Mr Blair claimed the Tories aimed to spread as much disillusion and cynicism as they could to depress the overall vote, and persuade Labour supporters to vote for smaller parties.

"But to those tempted, I say this: it all leads down the same path - to a Tory government in power, to Michael Howard in Downing Street, to Britain going back to a failed past, not forward to a better future," he said.

Mr Howard said yesterday: "Casting a vote shouldn't be a mechanical choice between the lesser of two evils. It should be an opportunity to tell the world what sort of country you want. It's not a crime to want a better school for your child, better healthcare for your mother and a better life for your family."