Andrew Grice: A future for all that may keep New Labour in power

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The central challenge facing the Government, in the eyes of Tony Blair and his advisers, is how to renew itself without first becoming the Opposition. The Prime Minister is now at the critical moment; the proverbial crossroads.

Are we at the beginning of the end of the Blair era, as many Labour MPs believe (and some hope)? Or can the Prime Minister inject new life into his "project" and pick up speed on the long road signposted "public service reform" and "euro"?

The Queen's Speech unveiled yesterday has been deliberately coupled with a consultation exercise to be launched by Mr Blair tomorrow. The Prime Minister is determined that the public, not just the Government, should address the key issues facing the country. He does not plan some mammoth focus group, but a serious debate about the hard choices facing Britain, ranging from whether taxes should rise to pay for better public services to the extent to which the state should interfere in our daily lives.

Mr Blair's big conversation with the nation and tomorrow's document, called Prospectus, are meant to produce ideas for Labour's election manifesto, the third term he seeks and even beyond. "We are only at the halfway mark; we want to serve as long again as we have already done," a Blair ally said.

The word hegemony crops up a lot in Downing Street's internal discussions. Blair advisers have been studying closely how other social democratic governments, especially in Sweden, have managed to retain power. This debate has been sharpened by the coronation of Michael Howard. His performance yesterday in his first set-piece debate with Mr Blair since becoming Tory leader left Labour MPs in no doubt they have a fight on their hands.

One Blair aide said: "All governments face the problem of how to renew in office. We have now arrived at that point. The problem is that, the longer you are in power, you are in danger of becoming the establishment and running out of steam. The antidote to that is fresh ideas, change and reform and a genuine dialogue with the public and the party."

Although there was as much pomp and ceremony as usual when the Queen opened Parliament, the politics of the day was modernised through a big push to "sell" the contents to Labour MPs, the trade unions and party members. Peter Hain, the Leader of the Commons, sent them a 100-page "political" dossier, setting out the dividing lines with the Conservatives.

The Government's aim is to take the Labour Party, particularly its MPs, with it from the start of the parliamentary year by spelling out why its legislation is "right for a Labour government". A painful lesson has been learnt from the controversy over foundation hospitals, an idea which was never explained to Labour MPs in the same way, and only just squeezed through Parliament last week.

Yesterday Mr Blair sent an e-mail to Labour members, saying: "This is a progressive and radical programme for the year ahead." Using a theme we will hear a lot in the election run-up, the Prime Minister said Labour would "build a future fair for all" while the Tories "stick to their failed agenda of the past". Mr Blair hopes that the arrival of Mr Howard on the scene will help him to make this contrast; in the Commons he dubbed the new Tory team "yesterday's men".

However, the best sales pitch in the world will not "sell" what the majority of Labour MPs regard as a bad product; allowing universities to charge top-up fees of up to £3,000 a year. On the current arithmetic, the Labour rebellion over variable fees will dwarf the one over foundation hospitals. The Higher Education Bill could easily be defeated in the Commons unless there are significant concessions during its passage. Such a humiliating defeat would be the beginning of the end for Mr Blair.

Yesterday's package is certainly not a recipe for a quiet life. There will be some concerns on the Labour benches about yet another "crackdown" on asylum-seekers, although many MPs admit this is an issue on which they receive much pressure from their constituents.

The absence of a Bill to ban fox hunting has raised the hackles of many Labour MPs. Mr Blair wanted yesterday's programme and today's headlines to be dominated by issues that concern ordinary people, not the anti-hunting brigade. The betting is that the Government will force through a ban but Mr Blair does not want to shout it from the rooftops.

Yet his refusal to make such a pledge in public will make it harder to win the fight he has picked with his own party over university top-up fees.