Blair orders MPs to be silent

Labour squabbles: Leader seeks end to disarray as he prepares keynote speech to business

Tony Blair will today tell voters that they would better off under a Labour government, with a warning to his party to end the appearance of disarray over links with the trade unions.

The Labour leadership last night ordered silence from its MPs and frontbench spokesmen to focus attention on the "millennium challenges" which Mr Blair intends to lay out in a keynote speech to businessmen in the City of London.

He will announce that he has asked his Shadow Cabinet to reinforce that message with a series of "heavyweight speeches". Senior colleagues are lined up this week to set out more of Labour's agenda, including Jack Straw on law and order, Robin Cook on Europe, and Gordon Brown, the shadow Chancellor, on the economy.

Mr Blair is alarmed that the tactic of using last week's Trades Union Congress conference to assure the voters that Labour was not in hock to the unions had got out of hand. He feared that the row over alleged remarks by Stephen Byers, an employment spokesman, that Labour would break the links with the unions would spill over into the party's conference in two weeks' time.

That row was fuelled yesterday by another Blairite, Kim Howells, who called for the epithet "socialist" to be "humanely phased out". Tony Banks, a leftwing Labour MP, complained on GMTV "you are left wondering whether this is all part of a softening-up process". Tony Benn said the leadership should go on the record about its intentions to open a proper debate in the party.

Before more anger was stoked up, Labour leadership sources last night said that Mr Blair wanted a "period of silence" from its MPs and spokesmen. Mr Blair told colleagues he regarded the row over the comments by Mr Byers and Mr Howells as "a fuss about nothing" and a distraction from the need to set out a positive agenda.

"Tony's concern is not that what frontbenchers have done is particularly heinous. His concern is that unless there is an element of common sense and a time of silence over the coming weeks, the message won't get through," one source said.

The Chancellor, Kenneth Clarke, will today unveil a Tory poster depicting the "satanic eyes" with a warning that families were pounds 700 better off this year and Labour would put that at risk. But Mr Blair will say: "Our objective is to make most British people better off." He will couple that message with a reassurance to City financiers that New Labour is more friendly to business by pledging to remove legal and tax obstacles to long-term investment.

Improving living standards, high employment and greater security will only be achieved by the economy substantially raising its productivity. The demands by the Confederation of British Industry for a two-tier system for capital gains tax is also being considered, Mr Blair will say.

Harriet Harman, the spokeswoman on social security, is also planning to tackle demands by former Cabinet minister Baroness Castle for immediate increases in the state pension and the restoration of the earnings link. Lady Castle is threatening to inflict an embarrassing defeat on the Labour leadership at the party conference, but Ms Harman will campaign across the country, warning that Lady Castle's plans would cost the equivalent of 2.5p on the standard rate of income tax, and would not direct help to the poorest pensioners.

Ms Harman estimates that it would cost pounds 3bn in the first year to raise state pensions by pounds 5 and pounds 8 for couples with a further pounds 2.5bn for a link with earnings. The unions could prove crucial in rescuing the leadership from defeat but Ms Harman said: "We are not asking them to do us a favour. We are asking them to listen to the arguments."