Blair accuses Howard of playing the race card

Tony Blair has accused Michael Howard, the Tory leader, of playing the immigration card to avoid fighting the general election on the economy and public services such as health and education.

Briefing 100 Labour candidates in London yesterday, Mr Blair said immigration was a matter of "genuine" concern among voters. "It is essential we respond. There are genuine problems and we are dealing with them," he said. "That is what the Government's proposals will do."

But he accused the Tories of seeking to get "immigration up as an issue that displaces, that shifts everything else to the side", adding: "I happen to think they are foolish to put all their eggs in the immigration basket. I think the public is a darn sight smarter than parts of the media and the Conservatives give them credit for. They realise this issue is being used in the months before a general election."

Mr Blair also appeared to scotch Whitehall rumours that he could call an early poll in March to catch the Tories off guard. The Prime Minister told his party's candidates they would be heading for the election date "in months", suggesting he is going for a 5 May poll as widely expected to maximise turnout with the local elections on the same day.

Senior ministers also dismissed speculation at Westminster that he would call an snap election. "It would mean scrapping the Budget and he is not going to do that," one said.

There are fears in the Labour leadership that abandoning the Chancellor's Budget in March would look like panic and would be used by the Tories to run a scare campaign about a threat of tax increases after the election. Mr Blair said Labour would fight the campaign on the economy and Gordon Brown's delivery of low inflation and high employment. "The economy is central," he said. Labour strategists said he would avoid the mistakes made by Democrats in the US presidential election by taking the economy too much for granted.

The Prime Minister will today also try to defuse the row over the Government's proposals for house arrest at a "terror summit" with the Tory and Liberal Democrat leaders in Downing Street. The Home Secretary, Charles Clarke, has hinted he is prepared to water down the proposal to rush it through Parliament before the election.

A May election would force the Government to jettison most of its current legislation in April, unless the other parties agree to let it through without further amendment. Mr Clarke will be forced to negotiate with the opposition parties to get the new anti-terror Bill on the statute book. The Liberal Democrats confirmed they would not let it through unless a judge had the final say.

Mr Clarke has told the Cabinet the house-arrest plan is also opposed by police and the security services. One possibility is to scrap proposals for 24-hour house arrest and rely on curfews and electronic tags.

The Tory co-chairman, Liam Fox, said: "Tony Blair has lost touch with the British people and forgotten their priorities. Controlled immigration is an issue that matters to people, and we are not scared to talk about it. It is one of the five priorities we will focus on, along with cleaner hospitals, school discipline, more police and lower taxes."