Emboldened Blair declares resolve to tackle backbenchers on welfare reform

Tony Blair, emboldened by the political success of the war in Iraq, vowed last night to pursue his radical overhaul of public services in the face of opposition from the unions and his own party.

The Prime Minister signalled in an interview that he was ready for renewed clashes with backbenchers to push through reforms of the NHS and education system and signalled a shake-up of pensions.

He also sent a shot across the bows of the unions, warning that he was not prepared to give in to any form of "resurgent militancy" and saving particular scorn for the National Union of Teachers (NUT).

Speaking as he prepares for a meeting this week with the Parliamentary Labour Party on foundation hospitals, Mr Blair told the Financial Times that the Government must "opt for the radical, not the quiet life". He said: "What we have got to do is fundamentally to redraw the way the 1945 welfare state settlement is implemented and we have got to do it for health, for education, for the employment and labour markets and actually in the longer term for pensions too."

Asked about opposition from within Labour about the reform project, Mr Blair added: "I will do what is necessary to carry through the programme."

The Prime Minister also criticised the NUT for its decision to call a strike ballot over school tests, labelling the threatened action "nonsense".

Mr Blair said: "The idea that we shouldn't have to test [pupils] and shouldn't set targets ... is completely absurd."

Meanwhile the House of Commons Treasury Select Committee warns today that Britain would miss a "window of opportunity" to shape the eurozone if the Government decides not to join the single currency.

A report by the committee concludes that failure to join would lose Britain vital leverage in the eurozone. The finding is bound to disappoint allies of the Chancellor, Gordon Brown, who have been urging a cautious approach to euro entry. But aides of Tony Blair, who have suggested that the decision must have a political as well as an economic dimension, will be delighted.