PM hints that middle class may have to 'pay own way'

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Tony Blair hinted yesterday that the middle classes might have to "pay their own way" to safeguard the welfare state for the poorest.

Launching his campaign to win a third term, the Prime Minister rebuffed Labour critics calling for a change of direction and said he would fight the next general election on the political centre ground.

Opening a "Third Way" conference in London, Mr Blair ruled out income tax rises but confirmed a report in The Independent last week that he was considering "fair charging" for some state-run services. "We need to keep direct taxes low to incentivise work. But unless we want the result to be poorer services, we need to address the balance between what the citizen pays individually or collectively," he said.

He suggested the better off might have to rely less on the state for pensions and transport, for which road pricing could be introduced. He said: "In parts of the welfare state, like pensions and transport, we have to find new ways of funding them, based on contributions from individual citizen and state."

The Government has applied this principle with plans to allow universities to charge top-up fees of £3,000 a year, arguing that people who benefit from higher education should contribute to the cost. But it will rule out charges for other parts of the education system and the NHS.

Mr Blair acknowledged his recent difficulties by admitting governing was "tough" and that he was "fighting on two fronts" - under fire from both the left and right.

But Mr Blair faced fresh criticism from inside his own party when the former cabinet minister Clare Short called on him to stand down. In an interview for tomorrow's Sunday programme on GMTV, she said: "There's two good years until the next election. We'll see how this plays out. I think the best solution for Tony would be if he planned to move on before it gets ever nastier."

Rejecting calls for more policies to appeal to traditional Labour voters, Mr Blair said there would be no "retreat from the centre ground. Our true mission is precisely to fight on that centre ground, to show how we can answer the challenge of modernisation through the values of progressive politics. New Labour was successful because we fought for and won the centre ground. We must never give it up."

Defending plans for foundation hospitals and more specialist schools, the Prime Minister said: "We must never be the defenders of the status quo. We are the change-makers. And however painful the change, it is worth doing because a reformed welfare state is the only way to social justice in the 21st century."

Within weeks, the Government would announce its first wave of foundation hospitals and plans to extend choice in health. Eventually, everyone would have an "electronic patient record" for the NHS, "with the supply of care opened up to a range of providers - public, private and voluntary". Mr Blair said the centre-left's challenge was to re-cast the welfare state and public services for the new age of globalisation. Labour must confront "the 20/60/20 society": 20 per cent well off, 60 per cent reasonably off and 20 per cent left behind.

The Prime Minister said: "The battle at the next election will be a very simple, almost traditional battle with a right more hard to the right than ever. They will fight on a platform that is: anti-asylum and immigration; anti-Europe; anti the extra levels of spending, in order to give tax cuts to the few.''