The Week in Politics: Blair's hot air might just prove to be the start of a second wind

Tony Blair is enjoying a brief respite from his domestic woes this weekend. He hosts a conference of centre-left leaders, ministers, advisers and academics from around the world.

On the international stage, Mr Blair still has star quality. Some leaders who opposed the Iraq war secretly admire his guts. Most prime ministers would give their right arm for his massive majority. Although the New Labour brand looks past its sell-by date at home, it is still regarded as a trailblazer by other centre-left parties.

As the "Third Way" conference got under way yesterday, leaders jostled for position to be photographed with Mr Blair and share a platform with him. One minister told me ruefully: "The Blair glitter has not worn off - on the international scene."

How Mr Blair must wish he was as popular on the home front. As he met his old friend Bill Clinton at a conference dinner last night, the former president's advice on a previous occasion must have been ringing in his ears: You only get one chance, so don't ruin it in your second term as I did.

The mood at Westminster is fractious. It is not just a dose of the "summer madness" that afflicts all mid-term governments, when MPs gossip, plot and rebel as they wait for their long holiday. When Labour MPs drank until 2am on the Commons terrace after Tuesday's revolt over foundation hospitals, many were in a black mood. Several who reluctantly backed the Government on hospitals vowed to rebel over university top-up fees in the autumn. That will be their line in the sand and, without important changes, Mr Blair will not get his proposals though the Commons.

Mr Blair probably cannot wait for his holiday in the Caribbean. Since the end of the Iraq war, everything seems to have turned sour. His mindset is that the public and his MPs are an ungrateful lot. He risked his political neck to get rid of the evil Saddam Hussein, and now he's being accused of taking the country to war on a false basis. It's all so unfair, isn't it?

The view from the Blair bunker is no different from that of previous prime ministers. In the end, they think everyone is against them. Blair aides tell me they now hate the BBC as much as they hate the Daily Mail, which is ludicrous. When I asked one Downing Street aide what Mr Blair really thought of the failure to find weapons of mass destruction in Iraq, he snapped: "He has got a country to run, you know."

For the moment, at least. The theme of Mr Blair's opening speech to the "Progressive Governance" conference yesterday was his "third term" agenda. Although he admitted Labour had a hard fight on its hands at the next election, the "third term" has been discussed at length inside Downing Street for months. Is this a sign that the Government is getting just a little ahead of itself, and taking the voters for granted?

To be fair, Mr Blair warned the Cabinet at a three-hour strategy session on Thursday that the Government needed to reconnect with ordinary people. He is fully aware that his personal ratings are plummeting - largely, it seems, because people do not trust him any more. Perhaps WMD has played a part. If so, my question to the aide was not so barmy.

There has been an intense debate in the Blair camp between those who want to focus on the "third term" agenda and those who support the "delivery, delivery, delivery" mantra that worked well in Labour's first term, when it met its "five pledges" and used limited performance targets to drive up standards - for example, in primary schools. The main doctrine was "standards, not structures" mattered.

In the second term, Mr Blair concluded that structural reform was needed to raise standards. Hence the focus on foundation hospitals and specialist schools. His critics say it would be better to concentrate on the schools and hospitals at the bottom of the pile rather than make the good ones even better pour encourager les autres.

It seems that the "third term" camp has won this argument. The focus now is on further reforms to show New Labour has not run out of steam, rather than meeting the plethora of targets, which are gradually being abandoned - a move unlikely to improve Mr Blair's trust ratings. What matters now, according to Mr Blair, is explaining the values behind the policies and highlighting the key dividing lines between Labour and the Tories.

The Blairites are convinced that the voters liked Margaret Thatcher's values and her general direction of travel rather than the fine print of her policies. They also argue that the "progressive" ideas being discussed this weekend are the only show in town for today's world. Although centre-left governments are no longer in the ascendancy in the European Union, the Blairites insist centre-right victories have been opportunist and not based on any particularly coherent, Thatcher-like philosophy.

So can the "Third Way" help Mr Blair win his third term? Like New Labour, it has lost much momentum, and this weekend's conference is designed to recharge its batteries. The seven policy commissions that reported to it, while addressing global problems, will help to shape Labour's election manifesto.

It is easy to dismiss the "Third Way" as an empty vessel and its conferences as hot air. But at least there is some new thinking going on about how the Government can renew itself in office, without losing power as previous Labour governments have done. In three weeks, Mr Blair's administration will become Labour's longest-serving one. So he must be doing something right.

Despite the Prime Minister's growing list of problems and arguments, I still expect him - and New Labour - to find a second wind. The process starts this weekend. The Blair "project" is not dead yet.

a.grice@independent.co.uk