The Week in Politics: Permanent revolution will not save Blair from revolt

Tony Blair avoided the television cameras yesterday because he had no desire to be asked about Labour's results in the local government elections.

Although the loss of about 800 seats could be seen as a bout of "mid-term blues," the elections on Thursday had a subliminal message for Mr Blair. His New Labour brand seemed less popular than the "traditional Labour" platform on which the party fought in Wales, where it will not set up foundation hospitals and will scrap prescription charges.

However, there is little prospect that Mr Blair will retreat from the further burst of reform of the public sector he promised at his press conference last Monday, designed to mark a return to domestic matters.

After a successful war in Iraq, the Prime Minister looked like a man with the bit between his teeth. But I admit I felt flat as I left Downing Street after the conference. The trouble was, I had heard this message many times before.

Whenever Mr Blair has been in trouble or his project has run out of steam, his antidote is to call for "more reform". While hating Trotskyites, the Blairites believe in Trotsky's mantra of "permanent revolution". It is almost as if they don't know what they stand for and have to press the "change" button to define themselves.

So will we finally see "Blair the Bold" show the same courage on domestic issues that he has displayed in Kosovo, Afghanistan and Iraq? And what does "radical reform" mean?

Some interesting ideas are now fomenting inside Downing Street and in the think-tanks which often plant the seeds from which government policies grow.

No 10 is, for example, taking a close look at local government. The 34 per cent estimated turn-out on Thursday highlights again the disconnection between town halls and electors. The issue has shot up the Government's agenda because of its claim that 19 local education authorities have failed to pass on money meant for schools.

New Labour has never liked or trusted local government. So Blairites plan to extend to other services the model used for foundation hospitals – "public interest companies" – with local people elected to a management board. Blair advisers are asking: "If it's good enough for health, why not have locally elected boards to schools and the police?" Local authorities would no longer be "piggy in the middle" between government and frontline services. Instead, they might concentrate on regeneration, the environment and attracting business, and perhaps oversee services provided by "single-issue" boards.

Last weekend, a conference chaired by the former cabinet minister Peter Mandelson discussed the future of the centre left ahead of a "Progressive Governance" conference in London in July to be attended by Mr Blair and other world leaders. Mr Mandelson acknowledged the need for the "progressive left" to "move on" because the world had done so since Mr Blair's much-vaunted Third Way was launched.

Mr Mandelson said the centre left could no longer define itself negatively "in terms of what we're not and what we've left behind". It had to rethink its belief that globalisation was an unqualified opportunity: it brings many benefits, but it also has downsides in a world beset by risks, in which inequalities are growing and many people feel "insecure" – over crime, terrorism, asylum, public services or poverty.

Mr Mandelson called for a "new politics", involving "local agents of democratic participation, to drive economic and social development" and to engage people who believed that politics was remote from everyday concerns. The proposed health, education and police boards might fit the bill.

There was much talk of "investing in babies" – closing the growing "wealth gap" by ensuring that children from poor families get an equal chance.

His remarks were welcomed by Labour figures as a sign that Mr Blair would act as a "modernising social democrat" rather than as a "centrist" moving away from Labour's roots.

But only time will tell if Mr Blair will really ditch his "command and control" instincts in favour of a new localism, or go for a radical redistribution of wealth – for example, by reforming inheritance tax, currently skewed to help the well-off. That could be a bridge too far, since it would be seen as an attack on the middle classes, whom Mr Blair has long cultivated.

A big problem is how to pay for redistribution. There are political limits to what can be achieved by tax rises, so the better off might have to be charged for some services. This is controversial: Mr Blair has already beaten a retreat after floating the idea of "co-payment". He has reassured Labour MPs this would not apply in the NHS in an attempt to head off the rebellion that will happen on Wednesday over foundation hospitals.

The coming revolt will show that, for all the talk of "permanent revolution", Mr Blair has a lot of work to do to persuade his own party to march in step with him.

¿ Mr Blair's joint press conference with Vladimir Putin, Russia's President, on Tuesday was a stilted affair. No headphones were to hand, so the flow of talk was punctuated while interpreters translated.

After Mr Putin's ironic put-down about the failure to find weapons of mass destruction in Iraq, Mr Blair was in no mood to be interrupted. "No, listen, I want to carry on," he barked at his interpreter.

Although the public differences dominated the headlines in the British papers, Downing Street was pleasantly surprised when an official telegram from our embassy in Moscow said the Russian media had been "calm and balanced". The daily paper Izvestiya described Mr Putin as "Mr Compromise".

One British official quipped: "You have to wonder how disastrously a press conference would have to go for the Russians to say it went badly."

a.grice@independent.co.uk