DEAR TONY

To: Tony Blair From: Philip Gould (aka DM) Subject: Unfinished Revolution (continued)

TONY - these are not intended as notes for your speech today. They are simply working background thoughts as you finalise the text and contemplate the rest of the conference.

Further to my leaked memo in may, I have restricted circulation of this one to the key folk among those listed in the glossary at the end. Hope you find this useful. PG

I know you will be spelling out again with colleagues this week the need not to be complacent. While it is true that no government has had ratings so low for so long as the present one, it might help to stress Labour's extraordinary experience in the run-up to the 1964 election. We are 19 months away from the last moment that John Major can call the election. At the same point in 1963 Gallup had Labour at 50 points, and in the summer of that year its lead over the Tories went up to 20 points - amazing for that era (graph attached).

The government had been engulfed in sleaze; the prime minister was widely regarded as ineffective, and Labour had a hugely popular leader in Harold Wilson (personal approval rating after the 1963 party conference of 67 per cent compared with the newly chosen Sir Alec Douglas Home's 42). Yet in the month before the election our lead narrowed to only three points and on polling day Labour's share of the vote was less than 1 per cent over that of the Tories. And don't forget the Tories were helped by two giveaway budgets of just the sort that Clarke may try and pull. Nothing could more underline the importance of the campaign itself and the current work being undertaken by JP(1) and PM on target seats.

How the Tories could recover

July wasn't, of course, a Tory relaunch. But the government reshuffle has been at least partly successful. On the one hand our private polling shows quite a settled view on the part of the electorate that Heseltine is there because of a deal to save Major's skin, whichworks against Major's public image. But Heseltine is certainly an effective presenter (who yesterday appointed his own personal press spokesman) and as Major's main front man, along with Clarke, is capable of drawing blood from us. This is going to be increasingly important from the late autumn. The only question in town that matters isgoing to be "can Labour be stopped?" And we can expect to see the Daily Mail and maybe the Sun joining the Daily Express in trying to make the answer yes. This is obviously AC territory. The new government has shaken off a lot of its sleazy image - at least for the time being.

Two other key points: first, GB has once again, in his speech yesterday, brilliantly put the Government on the spot over the windfall tax. But they could still shoot our fox on this. Of course, it would mean at least 24 hours of huge embarrassment for Clarke after his Budget speech in November; but it would also give them another pounds 3bn for potential tax cuts. Second, Europe: the current disarray over EMU could ease voter- alienating Tory division, particularly since the Euro-rebels were warmly disposed towards Rifkind's "British interests" speech at Chatham House. As you well know, our focus groups of disaffected Tory voters aren't keen on an uncritical line towards the EU; we must avoid ending up outflanked and looking more pro-European than the Europeans themselves. Should JP(2) prepare a paper on this?

The project

I am significantly less worried than I was about what I called in May "the lack of a political project that matches the Thatcher agenda of 1979, nor one that will be able to sustain Labour in government and transform Britain". Since the triumph of replacing Clause IV and the development of policy after that, a programme has begun slowly to take shape (see Times cutting, attached, top). We certainly don't want the old-style Labour wish list covering, as you put it, "everything from stray cats to world disarmament". All the signs are that the electorate are not looking for detailed policies unless they are properly worked out and costed. Some of those are being developed or introduced this week. Others will follow. But let's not forget that when we say that Margaret Thatcher "travelled light" into the 1979 election she did have a clear philosophy, in part at least: shrinking the state, smashing the unions, and reviving the idea of individual responsibility.

I enclose an article in the latest issue of Renewal by Alex De Mont, a former David Owen adviser who has now joined Labour and is on the board of the Social Market Foundation. He argues that "new policies by themselves will not produce a new identity for new Labour, as they failed to do for the SDP; novelty eventually loses its shine ... the test of the Blairist framework will be the extent to which it transcends Labour Party boundaries and repositions social democracy beyond traditional right and left agendas".

This may be just a lot of SDP flannel and De Mont doesn't give examples. But let me try one on you. The Government has been discussing for some time scrapping both state industrial injury insurance and state maternity benefit. We have opposed, as you would expect, both these plans. But wait a minute - isn't the principle involved just the same as that for the national minimum wage? Namely that the state/taxpayers should not subsidise employers that do not fulfil their responsibilities.

After all, if employers were obliged to take out third-party insurance against industrial injuries the insurance companies would soon ensure that their health and safety policies were up to scratch. Far from taking the traditional "left" position that the state should provide, shouldn't we be saying: let's relieve the taxpayer of this burden and put it on the employers. Or have we moved so far to the "right" that we, like the Government, shrink from adding any costs to business? I don't feel these are dilemmas we have yet resolved. Perhaps we are driven back to the old notion of "the enabling state" to define a "coherent theory of Blairism". Maybe we need a new way of saying this. If you agree I will discuss with BMP.

Economy (and old Labour)

Gordon Brown was excellent in holding the line against "tax, spend and borrow" yesterday and was rewarded by opposition falling away when the minimum wage motion and the T&G's old Labour rallying cry on the economy weren't even pressed to a vote. All our quantitative and qualitative polling shows that GB's got it right, and in any case we modernisers thoroughly reject the idea that Labour can or should go into the next election once again hammering middle-income, let alone lower-income, groups with higher taxes. I know, too, that you are pretty dismissive of the idea that the neo-Keynesian left has any coherent strategy, let alone the leadership and organisation, to offer a credible alternative. But there are quite a few disgruntled pro-Labour academics around who are looking for a more old-style redistributive and job-creating programme. These guys have to be watched, if only because they help to fuel unease within the party. Keep an eye, too, on Roy Hattersley, who was at it again on tax yesterday. And we should note the research in the Independent yesterday showing that not all the new members joining the party are as reconstructed opponents of tax and spending as we had hoped.

We all know that part of our task is to bring old Labour with us - without making concessions - and I thought GB was first-class at finding the right language to do this yesterday. That's partly what I was getting at in May when I warned that Labour was not "yet a cohesive, integrated political party sharing the same political ideology". GB's promise on VAT on fuel was a big help here. Even Liz Davies welcomed it, for goodness sake. But it is vital that we stick to our line on not raising personal taxation for ordinary aspiring families and that Brown is given continued public backing from the whole Shadow Cabinet on this.

The team

Don't let what I said about a unified command structure in May distract us from the need to demonstrate that Labour is not a one-man band. Unless we do something about this we will become increasingly vulnerable to what is sure to be an intensifying line of Tory attack: that you are persuasive but the rest of the Shadow Cabinet belong to a different, "real", and thoroughly unreconstructed Labour Party (see Standard cutting, attached, top right). Our polling suggests that beside yourself, only GB, JP(1) and to some extent HH have a clear identity with the voters. RC and JS are there, of course, but need to be higher profile, singing the same tune, of course. Plans are in hand to ensure that happens.Meanwhile: have a good one. PG.

Glossary

PG Philip Gould, Blair adviser; JP(1) John Prescott; JP(2) Jonathan Powell, Blair's chief of staff; AC Alastair Campbell, Blair's press secretary; GB Gordon Brown; PM Peter Mandelson; RC Robin Cook; JS Jack Straw; HH Harriet Harman; BMP Boase Massimi Pollitt - Labour's advertising agency.

DM - Donald Macintyre, drafting assistant