Stephen Byers: What my party needs is a strategic vision

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This morning Tony Blair will be taking his breakfast in the sun looking out over the blue waters of the Red Sea. He deserves the break. This has been a tough and difficult year for the Government, and for him personally. I have no doubt that his personal spirit will have been lifted by the capture of Saddam Hussein and by the historic agreement of Libya on weapons of mass destruction - an agreement which shows that delicate diplomacy away from the glare of publicity can pay off.

But the Prime Minister faces a challenging new year - his tenth as leader of the Labour Party, with the general election probably little more than 18 months away.

Understandably, the immediate focus will be on the difficulties he will face in January. Just a few weeks into the year Lord Hutton will publish his report into the circumstances surrounding the death of the weapons expert Dr David Kelly. This will be a golden opportunity for Michael Howard to demonstrate the forensic skills he developed at the Bar. Later in January Labour MPs are likely to demonstrate their opposition to university top-up fees by voting in large numbers against the Bill which would pave the way for their introduction.

But it would be a mistake to be totally pre-occupied by events in January. The challenge for Tony Blair is to lift his eyes from the immediate and to identify the vision his government is striving to achieve, and then to return with renewed energy and determination to deliver this objective. This would be the best response to those who are concerned that the Government has lost its momentum and sense of political direction.

Ironically, a more credible and self-confident Tory party provides Tony Blair with a renewed opportunity to define where Labour stands after nearly seven years in office.

In politics you cannot win an argument unless you go out and make one. But it is extremely difficult to do this when the political opposition is widely perceived as being weak and unable to offer a realistic alternative. Yet this has been the situation faced by Tony Blair since he became leader of the Labour Party in 1994.

The dying days of the discredited government of John Major, and then the William Hague and Iain Duncan Smith leaderships of the Tories, meant that on most occasions Tony Blair was defining himself and New Labour against the old Labour left. The abolition of clause 4 (which committed the party to "common ownership of the means of production"); welfare reform; the strengthening of policies on asylum, immigration and criminal justice; the reform of public services and the measures needed to tackle international terrorism are all areas where Tony Blair has taken on the Left.

There is no doubt that such an approach has produced electoral benefits. It has demonstrated to the voters that the Labour party has changed. It is no longer dogmatic and doctrinaire, but is practical and pragmatic. But such an approach was never going to last for ever. With the Tory party resurgent, now is the time for Tony Blair to draw up dividing lines and define himself and New Labour against the political right.

This has been made easier by the decision of Michael Howard to adopt the policy programme drawn up under Iain Duncan Smith's leadership. It is a programme which reflects those Tory values that have been rejected by the British people - elitism, selfish individualism, a belief that there is no such thing as society, and the equivalent international creed of insularity and isolationism.

This is also dangerous positioning for Michael Howard, as the policies provide a link between the Tory party under his leadership with the time when they were a deeply unpopular government, with him in the Cabinet implementing policies that benefited the few at the expense of the many.

The political imperative for Tony Blair and his Government is to attack these Tory values and to demonstrate that the values of the left - social justice and fairness, opportunity for all and personal empowerment - are more relevant to the world of today and the challenges we face. To achieve this the Prime Minister needs to set out a strategic vision for the future based on those values. It will need to define what the Government is for and to contain a clear statement of where Mr Blair intends to take the country and how we will get there.

Make no mistake, a strategy is not a set of attitudes, or a range of worthy, small scale initiatives to placate the 24-hour news media, or a position taken in response to the demands of an interest group. It is a statement of principles and values which underpin a policy platform. This is the right time for such a statement. It should be seen as part of the process of renewal in office - one of the most difficult tasks for any government.

For such an exercise to be a success it will need to reflect on those difficult issues that the Government cannot ignore. For instance, the fact that levels of personal debt are now at a record high. With a number of individuals in a very exposed position, the question is raised as to what part the Government can or should play in such a situation, not just to protect the individual but also to ensure stability for the wider economy.

We are witnessing large-scale investment across our public services with the increase in national insurance contributions being used to fund increased spending on the health service. But time is now pressing, people want to see a return for their money with tangible improvements in quality and standards of provision.

The last year has shown the extent to which events can distort and dominate the Government's agenda. There is only one way in which this can be overcome and that is through a strategic approach which paints the big political picture. This would allow Tony Blair to move beyond defensiveness and instead to be on the front foot showing leadership and vision.

The writer is a former Secretary of State for Transport

Alan Watkins is away