Low pay row threatens to scupper Blair's relaunch

Every new Government policy is to be put through a "fairness test", Tony Blair will tell his party this week. The Prime Minister sees the phrase as key to his drive to relaunch his Government and restore morale after months of damaging controversy over the Iraq war.

Yesterday an upbeat Mr Blair brushed aside all talk that he might be thinking of quitting. He even hinted that he will spend more years in 10 Downing Street than Margaret Thatcher, carrying on until the general election after next.

"If you stand, that's what you do, and I've said I want to carry on doing the job until the job is done," he said.

He said that "fairness" and social justice would be the main themes of Tuesday's speech to the annual Labour Party conference.

But behind the scenes, the new "fairness" is already under threat because Mr Blair's closest allies cannot agree over a proposed deal that could affect the working lives of hundreds of thousands of Britain's lowest-paid employees.

As the Prime Minister arrived in Bournemouth yesterday, braced for the most testing conference of his nine years as Labour leader, delegates and party managers were locked into an argument over whether they will be allowed to vote on the Iraq war. If they do, they will almost certainly condemn his decision to involve the UK in a conflict that did not have United Nations backing.

Party managers were also resigned to defeat over the proposal to create foundation hospitals, and were privately thanking their lucky stars that none of the big trade unions is forcing a vote on the equally controversial plan to allow some universities to charge higher fees than others.

But another, less well-known, source of friction between the Government and the public sector unions is likely to erupt in open disagreement. Last week, the Cabinet Office called a private meeting of officials and advisers from five Government departments to try to resolve the issue of the so-called "two-tier workforce", but it ended in disagreement.

Unions representing hundreds of thousands of employees in the NHS, universities and the defence industries are demanding the protection of the same code of practice that applies to council employees. The code bars private firms from taking over part of a council workforce and then hiring new people to do the same work under worse pay and conditions.

Stephen Byers and Alan Milburn, the former Cabinet ministers who have been advising Tony Blair on his relaunch, have both suggested that outlawing "two- tier" workforces in the NHS and other parts of the public sector would be a practical way of applying a "fairness test" without harming the interests of people who use public services. Mr Byers negotiated the code of practice when he was in charge of local government, and Mr Milburn, as health secretary, negotiated the improved pay and conditions that now apply to NHS employees but not in private firms working within the NHS.

But John Reid, the Secretary of State for Health, fears that if the code is applied across the board in the health service, it will jeopardise his plans to involve more private companies, particularly at new diagnostic and treatment centres. According to one insider, Mr Reid's political adviser Paul Corrigan fought a fierce "rearguard action" at last week's meeting to delay any agreement to end two-tier workforces.

Dave Prentis, leader of Britain's biggest union, Unison, warned yesterday: "This doesn't augur well for the party conference. It's really all about trust and fairness ­ trusting the Government to deliver its promises, and fairness to health service workers."