Labour warned of dangers in 'comfort zone'

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Tony Blair will tell his party today that Labour will win a third term providing the Government sticks to a radical agenda of "permanent renewal".

Tony Blair will tell his party today that Labour will win a third term providing the Government sticks to a radical agenda of "permanent renewal".

The Prime Minister will tell a Labour Party policy forum that it will fail to reinvigorate itself and re-inspire the country's support if it opts for "the comfort zone" of old Labour policies.

Mr Blair's blunt warning is intended to lay to rest the pressure from some senior figures in the party for a cautious manifesto for the next election. Mr Blair will say: "Now on the threshold of a possible third term, we have avoided strife and internal divisions and rupture between the party and the Government.

"That makes this experience unique in the 100 years of our history. But we do so only by permanent renewal." Defeat is in a Labour Party wedded to the comfort zone, he will add.

Committing Labour to producing more five-year plans, Mr Blair will say the challenges it must tackle include the fears of working people that their pensions will not provide security in their retirement, and affordable housing for first-time buyers in the South and those surrounded by derelict homes in the North.

"We need to focus with conviction on vocational skills and learning, work-life balance, childcare help for those with caring responsibility and flexible working hours for many families who are forced to choose between the work they need and the people they love," Mr Blair will tell the party.

Meanwhile, ministers have agreed to urge public bodies to "buy British" as part of a deal to avoid a damaging showdown with unions at the party forum in Warwick University.

The Chancellor of the Exchequer, Gordon Brown, told employees' representatives that fresh instructions will be issued to the Bank of England to ensure that the health of the manufacturing sector will be taken into account when policies are determined. But there was no agreement over the demand by unions - still the party's largest single source of funding - that workers enjoy the same employment rights as their French and German colleagues. Another major disagreement, over the concept of "choice" in education and health, also looked intractable with Downing Street insisting that "consumers" in both cases should be given more leverage.

But more encouraging for Labour and the big unions affiliated to the party was news that there could be agreement over pensions after union demands for employers to contribute to their employees' pension funds. The Government is unlikely to accede to the demand by unions that state pension be linked to earnings.

Last week, the Government agreed to end the so-called "two-tier" workforce across the public sector. The deal honours a commitment made by the Government three years ago.

Dave Prentis, leader of the public service union Unison, had been anxious to end a system in which private companies contracted to deliver public services were paying their new recruits less than they paid employees who had switched from the public sector.

Labour's high command has made the concessions to avoid a political bloodbath at the party's annual conference in the autumn. Unions still wield half the votes at the assembly. The GMB general union recently decided to withhold a £750,000 contribution to the party's election campaign fund and the Transport and General Workers Union could follow suit.