At last, Tony Blair has defined himself: he is a compassionate Thatcherite

He shares her suspicion of the state, her support for low taxes and her belief in the primacy of the special relationship

Expect more headlines over the next few days along these lines: "Blairites promoted as PM asserts his authority in Cabinet reshuffle". The headline will be accompanied by smiling young Blairites ready for action in their new ministerial roles. But what does the term "Blairite" mean, this political adjective so extensively used and yet so vague? At last we have a clearer answer from the leader who spawned the term.

Expect more headlines over the next few days along these lines: "Blairites promoted as PM asserts his authority in Cabinet reshuffle". The headline will be accompanied by smiling young Blairites ready for action in their new ministerial roles. But what does the term "Blairite" mean, this political adjective so extensively used and yet so vague? At last we have a clearer answer from the leader who spawned the term.

Tony Blair has defined himself more fully during his second term, and especially in recent months. We know now that he is an ardent Atlanticist, a cautiously pragmatic European, an active believer in the private sector reviving the public services, a supporter of self-governing schools and hospitals, and an advocate of top universities being able to charge students more for access. As a recent bonus he has blamed the 1960s for the rise in crime.

This is Mr Blair's personal agenda, liberated from the constraints of the early years when he had inherited a policy programme from his predecessor and felt obliged to take more notice of Gordon Brown. What are the values that underpin this agenda, the clearest exposition of Blairite policy?

Recently I have asked this question in passing to Cabinet ministers. Some suggest that a deep religious belief is the main driving force. Others suggest vaguely that he is a communitarian. His closet admirers hail even more vaguely his radical and modernising drive. As far as I can tell, few claim any longer that his values derive from the centre left of British politics.

None of them dare yet state the obvious, that Mr Blair is firmly on the right. One of Mr Blair's cleverest devices was to declare early on that terms such as right and left were irrelevant in the new globalised world, a superficial statement that sounded profound. The genuine modernisers in today's Labour Party are those who ask how a centre-left government should pursue its progressive policies in that globalised economy. They agonise over the modern role for an active state, they ask why the inequality gap has grown in recent years, and after much detailed thought seek practical answers to address it.

Mr Blair's policy agenda and political style is different. He is drawn back to the 1980s, building on the Thatcherite revolution. Mr Blair is not a pure Thatcherite. He is a compassionate Thatcherite, a contradiction in terms that explains many of the policy confusions that have arisen since 1997. Thatcherism in its purest form was not about compassion. She sought to set people free from the state. If people flourished that was all well and good. If they failed to do so, that was not a problem for the Government.

Mr Blair shares her suspicion of the state, her admiration for the private sector and business leaders, her support for low taxes and her belief in the primacy of the special relationship with the US. But his compassionate streak means that he does not always like the consequences of his own philosophy. He is a decent man, not the arrogant monster portrayed by some in the media. An emblematic example of his compassionate Thatcherism was the occasion he summoned Railtrack executives to Downing Street, pleading with them that they get their act together. The executives were baffled. They were accountable to their shareholders, not the Prime Minister. Mr Blair attempted to pull some levers only to discover that the levers were not there because of his own broader philosophy that the state should keep its distance.

As well as being a compassionate Thatcherite, Mr Blair is a journalist. He would be a brilliant editor, knowing instinctively what would make a good front-page headline. Home Office ministers were taken aback this week to discover that the carefully thought-through policies in their five-year plan were hailed by the Prime Minister as the end of the 1960s consensus. Mr Blair is not interested in detailed policies. They can wait. He wants headlines. What is more, he wants headlines that reassure the Thatcherite prejudices formed in the 1980s, never to challenge them. At the margins, his journalistic instincts were probably a factor in his decision to support President Bush. Like Mrs Thatcher, he sought headlines hailing his and Britain's boldness. It was a revealing Freudian slip when he told MPs to rejoice over Iraq as she had done over the Falklands. Her political ghost sits on his shoulder.

It all fell into place during that muted debate on the Butler report earlier this week. Mr Blair defended his use of patchy intelligence to support the ill thought-through policies of a right-wing President. The Conservatives were neutered as they had originally supported prime ministerial decision. For the time being the Conservatives are politically impotent in domestic policy as well. They support Mr Blair's right-wing policies or they mistakenly seek definition by moving further to the right with even more iniquitous and impractical proposals.

Only the Liberal Democrats have some political space. While Mr Blair can never accept that he is on the right, Mr Kennedy will never admit he is to the left of the Prime Minister. But that is where he is clearly placed. His speech in the Commons on the Butler report was his best since becoming leader. But he also delivered an effective speech a fortnight ago exposing the weaknesses of Mr Blair's over-hyped "choice" agenda. I spoke to a Cabinet minister shortly after that speech by Mr Kennedy. He told me that he agreed with every word of it.

This is where we are in the summer of 2004. Cabinet ministers agree with Mr Kennedy. Conservative MPs and right-wing newspapers admire Mr Blair. For now the Conservatives are in anguish, but it is the Labour Party that will face longer term problems arising from this bizarre political fluidity. By 1997 a new leader had a unique opportunity to challenge the prejudices that had flourished in the 1980s. Voters wanted to know why the trains did not work, why hospitals were dangerously filthy, what needed to be done to revive public services. They were ready to listen to alternative visions about Britain's place in the world. Instead, they got a compassionate Thatcherite.

Fortunately, below Mr Blair there are deeper political thinkers. Indeed one minister told me the other day that he hoped that some of the new bright generation of MPs - the David Milibands, the Ed Ballses - would come up with some proper policies and thinking once the election has been won, or else the Government would be in deep trouble. This minister is regularly described as a "Blairite". Some of Mr Blair's "Blairite" ministers are not thrilled with policy making on the basis of reactionary headlines and Thatcherite instincts.

As Mr Blair prepares for another reshuffle, the key question should be not what the Prime Minister is doing to his Blairite ministers, but when Blairite ministers will start to rein in Mr Blair. Political leaders can only dominate if their ministers allow them to do so. Cabinet government will return when the Cabinet decides to assert itself.

s.richards@independent.co.uk