Tony Blair and Ken Livingstone are closer than either would care to admit

In just four years, Ken has taken a weak office and wielded it to show that social democracy works and can be popular
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Ken Livingstone provokes moderate Labourites into a huffing, strutting rage. His testimony before Labour's National Executive Committee yesterday - where he was grilled to sizzling point by John Prescott on his loyalty to the party - cleared the way for his return to the Labour Party, which has left centre-left people who normally pride themselves on their cool pragmatism worryingly close to spontaneous combustion. Even loyal Blairites ask: isn't this the man who Tony Blair was denouncing just four years ago as a Trotskyite precision missile, fired in 1983 and now primed to smash into Downing Street just as the Labour Party seemed reformed once and for all?

Actually, Mr Blair's decision makes a lot more sense than most of his colleagues - like Jack Straw and Charles Clarke, who are violently opposed to Ken's readmission - can see. Ken and Mr Blair are closer politically than either would like to admit. Both are charismatic outsiders who are uncomfortable with the petty party tribalism of British politics. Ken once said that both he and the Prime Minister are "post-Old Labour politicians" - an astute analysis. Both are trying to introduce social democratic policies to a sceptical electorate.

To men whose entire political career has been built around serving the Labour Party, Ken has committed the primal crime of leaving the Labour tribe. Figures as politically varied as Dennis Skinner, Roy Hattersley and Gordon Brown believe this places him on a par with the Great Traitors of Labour history, Ramsay MacDonald and the SDP's "Gang of Four". Yet it's not hard to imagine Blair himself leaving behind the Labour Party if he thought it was necessary to achieve his own mix of Social Democracy Lite and Gladstonian idealism. Ken's crimes, to Blair's mind, were always against good sense and electoral success, not the Labour Party.

And in power, Ken has acted not only with good sense but something close to political genius. In just four years, Ken has taken a weak political office, hobbled at every turn by central government, and wielded it to show that social democracy works and that it can be popular. Look, for example, at his policy on buses. He has invested a whopping £4bn in the buses, ploughing an anticipated £500m extra from the congestion charge into the service. I admit I am biased on this issue: I use the London buses every day (not least because I have failed my driving test more times than I can bear to put into print), and my father has been employed as a bus driver in the new wave of recruitment launched by Ken. But any Londoner can now see an improvement. The wider political lesson, as on the NHS and schools, is clear: plough in extra money and things get better. Both Ken and the Prime Minister have a vested interest in helping the electorate to understand this.

At a time when cynicism about the state's ability to do anything is at a peak, Ken has pulled off a double whammy that Blair - an astute politician - must admire. The Mayor has managed vastly to improve a key public service - something Blair and Brown have achieved themselves in health - but he has also, crucially, managed to persuade the public that these improvements are real and substantial. A recent YouGov poll found that Londoners are twice as likely to think the buses have improved under Ken than to think they have deteriorated. Tony Blair knows a winning tactic when he sees one, and it is to his credit that he wants to learn from this rather than reject it for puerile tribal reasons.

Then there is Ken's other headline policy: the congestion charge. Again, he has acted not in defiance of the Labour Government but as an outrider and tutor to it. Now that the charge is a success, it's easy to forget how high the stakes seemed two years ago. No such charge had been tried anywhere in the world; Cassandras (especially London's Evening Standard) were predicting Armageddon; and, if it had failed, Ken would be confronting certain electoral defeat and political oblivion.

Yet it has, in fact, transformed driving in London, provided a model for clogged cities across the world and shown how - in a tax-wary climate - extra cash can be raised for public services by politicians without plummeting into unpopularity. Those who argue that Ken's policy hits the poor hardest clearly know nothing of London's poor, who in survey after survey have been shown to be dependent not on costly cars but on the bus - the service that has benefited most.

Travel on any early-morning bus and you will see London's invisible army of cleaners, far too poor to drive but now sitting in cheap, fast, clean buses, thanks to Ken.

The congestion charge also provides another lesson for the Government: risks are worth taking. After years of excessive focus-group-eyeing caution, Mr Blair seems to be learning this. Ken has often been a politician a decade ahead of his colleagues. The time has long since passed for a revisionist reading of his period in charge of the Greater London Council in the early 1980s. The Rupert Murdoch-approved history is that it was a time of loony-left larceny, when County Hall was a mini-Bedlam and the Red Flag flew over London. Actually, the policies Ken pursued then look rather far-sighted today. He saw that affordable public transport was a key issue that cut across class (and party) boundaries when he introduced Fare's Fair - the most successful transport strategy in the past 50 years.

He sensed that equality for gay people was both a moral necessity and good politics: gay people have been an incredibly loyal constituency for Ken, and they are a disproportionately large share of London's voters. He understood, well ahead of most Brits, that there would only be peace in Northern Ireland once Sinn Fein - then routinely described as Satanic monsters - was constructively engaged. The "looniness" is confined, then, to some foreign policy follies - but the London mayor plays no role in foreign policy, and never will.

Still, it's not hard to understand why there is so much resistance to Ken within the Labour Party. He is a frustrating, paradoxical politician. Twinned to his pragmatic, populist social democracy has been a maddening Trotskyite temperament. His response to Neil Kinnock's brave reforms of the party in the 1980s were often deranged - he opposed the expulsion of Militant Tendency and even called for Tony Blair to sack "that Tory" Gordon Brown as recently as the early years of New Labour. Yet Blair seems to understand that it is time to soothe the strange post-traumatic stress disorder that still afflicts the Labour Party from the traumas of the 1980s and, especially, 1992.

Whatever rhetorical scraps Ken throws to the far left, he has in practice been - along with Blair and Brown - the most impressive social democratic politician of his generation. The Prime Minister needs not only to welcome him back to the Labour Party, but to call him to Downing Street so he can give receive some tips on how to sell centre-left policies to the British public.