Brown issues veiled warning to Blair: We must be honest

Gordon Brown, the Chancellor, promised that spending on key public services would keep on rising yesterday as he positioned himself to the left of Tony Blair for a future leadership contest.

Mr Brown set out clear battle lines against the Tories at the next general election with a pledge to continue pumping billions of pounds into health and education over the next five years, probably through more borrowing.

But he also issued a clear warning to Mr Blair that the Government would win back public trust only by being "true to Labour values" and by stressing the party "needs not just a programme, but a soul".

Mr Brown won rapturous applause for a speech underlining traditional party themes of tackling poverty at home and abroad, a publicly funded NHS and full employment.

In a crucial passage designed to contrast his own roots in the Labour movement to those of Tony Blair, he even adapted the Prime Minister's "best when we are boldest" phrase from last year's conference.

"This Labour Party, best when we are boldest, best when we are united, best when we are Labour," Mr Brown said, triggering one of his longest standing ovations of recent years.

While Mr Blair is facing claims that he misled the nation and Parliament over Iraq, Mr Brown pointed out that the Government would only win support "by being honest with the British people".

In yet more clear differences between himself and the Prime Minister, he praised the national minimum wage as "our memorial to the work of the late John Smith" and said that Labour should never forget "where we come from".

As part of his bid to reassure the rank and file of his traditional credentials, the Chancellor clearly pledged for the first time that cash rises for schools and hospitals would continue in the next public spending review for 2005-2008.

He hinted that, contrary to recent speculation, the Treasury would not have to cut its growth forecasts in the coming pre-Budget report. "I can tell you today with Labour our economy will grow even stronger in the months to come," he said.

"We will be able in the next spending round to deliver new resources to our frontline public services. And I can tell you that by continuing the discipline we have had ... the next spending round will not only lock in the higher spending we have been delivering ... but do more: with further increases in spending and investment for our priorities in the years to come."

Treasury sources suggested that taxes would not need to rise to fund the increased spending and implied that increased borrowing would be used to plug any budget gap.

A senior aide to Mr Brown emphasised that government debt was lower than in most Western countries, and its current rate of 34 per cent was well below the 40 per cent ceiling imposed by the Chancellor. Extra cash for "priorities" will also come from efficiency savings in Whitehall.

The Treasury accepts that the record rises of the current spending review cannot be repeated indefinitely. Increased funding of 7.5 per cent for health and 2.5 per cent for non-health areas is projected up to 2008. "We aren't looking to have the same pace of growth, but these aren't cuts in spending." the aide said.

Mr Brown's speech mentioned Iraq only once and even then it was not about the decision to go to war, but rather about Tony Blair's "efforts today to bring security and reconstruction" to the country.

It was, however, peppered with references to the need to fight child and pensioner poverty and to open up the world of business currently "the preserve of the old privileged elite".

He used the word "Labour" no fewer than 62 times, mentioned Mr Blair just twice and conspicuously avoided any reference to "New Labour".

"My message to this conference is that where we have succeeded in our first six years of government, where we have built a bond of trust with the British people, and where we will succeed in future, it is by demonstrating the strength to take long-term decisions, it is by being honest with the British people about the direction and challenges ahead," he said. "And it is by taking the Labour road, often the hard road, being true to our Labour values. Never losing sight of Labour's vision for Britain, not stability for stability's sake, never power for power's sake, but stability and power for a purpose, to be on the side of hard-working families."

Mr Brown made a passing reference to foundation hospitals, but spent more time stressing Labour's traditional belief in an NHS based on need rather than ability to pay.

He attacked the Government's failure to tell the public of the success of its 500 Sure Start centres offering support to poor children and highlighted his own Child Trust Fund which will give £500 to every baby born into poverty.

The Chancellor declared that, at their best, Labour values were British values and he wanted a country that would act as "a model, a beacon for Europe, a beacon for America and the rest of the world".

In a passage that will delight Mr Blair's critics, he said: "I believe that at every point in our history, Labour needs not just a programme but a soul. The fairness we seek is much, much more than just being fairer than the Tories."

However, Mr Brown refused to back down on the need for reform of labour markets and the welfare state. As he spoke in the conference centre, members of one of Labour's largest union affiliates gathered in a park a mile away for a march and demonstration to protest against Mr Brown's alleged failure to protect British industry. Derek Simpson, joint general secretary of Amicus, which has hundreds of thousands of skilled and white-collar members in manufacturing, said: "This Government talks about value for money. You can get value for money by investing in the UK and protecting our jobs.''