`We're the people's party again'

Stephen Castle talks to Tony Blair about tax cuts, his passion for modernising Labour and his short-lived love-in with Paddy

A SUNNY morning at Gatwick Airport and Tony Blair has been posing on the steps of a jumbo jet with a group of Richard Branson's air hostesses. It could be 20 months until a general election, but in the last 16 hours, Mr Blair has held two public meetings, responded to dozens of questions and performed a host of regional media interviews.

As he drives across the tarmac on his way back to London the main concern among his entourage concerns Mr Branson's photo-opportunity with the "Virgin girls". "I hope they behaved when the photographers shouted at them to show some leg," says one Blair aide.

Sitting in the back seat of his government car, jacket-off, Mr Blair can afford to be relaxed about his week-long bout of megaphone diplomacy with Paddy Ashdown, leader of the Liberal Democrats. Mr Blair, after all, will be the senior partner if ever there is a Lib-Lab deal, and he gives short shrift to Paddy Ashdown's claim to be more radical than Labour.

The Labour leader offered a small olive branch, with a hint that members of a Labour Cabinet would be given a free vote in a referendum on proportional representation to which Labour is committed. With understatement Mr Blair (who is unconvinced by the case for PR), says: "I don't think you could ever have a referendum on electoral reform where everyone agreed with one another."

But that is where the love-in ended. The Labour leader derided the concept of the Liberal Democrats as the party of radicalism, willing to oppose any Tory tax cuts in November, to renationalise Railtrack and insist on proportional representation. On Railtrack, Mr Blair said, Labour has to explain how it could afford to buy it back while Mr Ashdown was never even asked.

"I think it is posturing to a very large degree," said Mr Blair. "I don't mean to be critical. There were many parts of his speech which I thought were very good and I think he essentially wants the same things for Britain that we do, but they really have to be extremely careful on the area of tax.

"If the Lib Dems really are positioning themselves as an old-style tax- and-spend party that would be a fundamental strategic mistake."

Tax looms large in Mr Blair's mind in the run-up to an autumn Budget which the Labour leader confidently predicts will bring Tory tax cuts. The issue had featured earlier when, on Friday morning, he had held a breakfast meeting with businessmen in the Desoutter suite at Gatwick's Forte Crest Hotel.

After coffee and pain au chocolat, one businessman asked bluntly whether it would be the basic rate or higher rate tax which rose to pay for Labour's plans. Labour, answered Mr Blair, smoothly, was not promising huge extra dollops of spending which would require more revenue.

Privately he sees the tax issue as a large elephant trap, with the Conservatives determined to start a debate on their terms - will Labour back their Tory tax cuts or not? Hence Mr Blair's irritation with the Liberal Democrats for "playing around at the edges on precisely the terms the Tories want the argument played".

The message from the Leader of the Opposition provides a sharp contrast with Mr Ashdown's; if anything he would like the tax burden reduced.

Mr Blair argued: "This country has had a 7p in the standard rate of income tax, tax rise. The Tories have put more tax on the average family than any government has done. The last thing they want to hear is that a Labour government is going to come in and make them even higher." The message to the party is: don't expect the Labour Party to oppose any forthcoming tax cuts.

Indeed the Labour leader happily talks of going further, of trying to restore that 7p to the voter's pocket. "Any sensible member of the public wishes the government hadn't put their tax up in that way. If you can get taxes down for the ordinary family, consistent with the proper running and management of the economy and with strong public services, who on earth could dispute that?"

Whether Mr Blair counts all top-rate tax-payers among those he wants to shield remains opaque. At present, he says, the party has "no plans', for a new top rate although if we do have plans we will disclose them [before the election].

Whatever the outcome, a windfall tax on the utilities makes up a growing proportion of Labour's revenue-raising plans. And, according to some city estimates, they could net the Treasury up to pounds 10 billion.

Mr Blair's hint is clear: "Most people believe that the way the privatised utilities have been behaving is an absolute scandal. Before the last Budget we put forward proposals to fund an unemployment programme, changes to the benefit system, and help for business through a windfall tax levied on the excess profits of the utilities. We will disclose our budget plans in the run-up to the Budget."

This determination to avoid the tag of the high tax party derives from a brutal critique of Labour's recent performance. As he drove through the south London suburbs, Mr Blair ruminated on his party's failure to capture Middle England: "We've been in opposition for16 years. We've lost the last four elections. It is 25 years since we won over 40 per cent of the vote. Even in 1959 when we lost the general election we still had way over 40 per cent of the vote.

"In 45 when we came to power, Attlee had been deputy prime minister, Herbert Morrison, Ernie Bevin - these people had already been in government. We are talking about a situation where we have been in opposition longer than at any point in our history, where our percentage of the vote was eight per cent adrift from the Conservatives at the last election.''

But has this led him away from socialism towards Owenite social democracy? "I know people say `oh he's only interested in the middle classes now, he's not interested in poorer people in society'. I cannot do a damn thing for anyone who is deprived unless I'm in government. And it is a simple fact that unless we broaden our appeal, we will not be in government."

Mr Blair defends the radicalism of existing plans: the creation of a Scottish Parliament and Welsh assembly and the introduction of a Freedom of Information Act. But as the party conference approaches Labour will seek to flesh out its new policy agenda.

The Left has been keen to see Mr Blair move away from party form and towards policy development. But it may be in for a rude surprise. On education, for example, the Labour leader talks the language of the conservative educationalist, concerned about standards rather than equality of outcome.

True, the teachers' unions will be pleased to hear that Mr Blair's view is that "if you want to value the teaching profession properly then you've got to show that in the way that they are rewarded".

But for Mr Blair, who has already talked of weeding out poor teachers, now the focus is on head teachers. He believes it is "very important that we ensure that the heads of schools are properly motivated. That we have better procedures for inspecting schools that are failing and for raising standards through the local education authority.

"There is a problem which is, in circumstances where head teachers are manifestly failing, how we deal with that because the head teacher is so crucial to a good school. There are schools that succeed with bad head teachers but they are few and far between. And you very rarely find a good head teacher and a failing school."

The most obvious solution is to put heads on time-limited contracts, and Mr Blair says he is "open-minded about how we proceed". He also hopes to lure some independent schools back into the state sector as "foundation schools" - reformed grant-maintained schools.

But it on his modernisation of Labour that Mr Blair expresses most passion. He rejects criticisms of his private office, key modernisers, who were attacked by backbench MPs this summer.

"Very few", believes Mr Blair, "really disagree with the overall process of modernisation. That's why these criticisms come in terms of style or whatever. There is not a serious intellectual argument against the process of change. There is a lot of tittle-tattle about unelected groups or leaks and all the rest of it, but there isn't a fundamental serious argument.

"By contrast the Conservative Party's divisions do centre on a fundamental serious intellectual argument against John Major's position [on Europe]."

The critics, he believes, are confined to a small group of the Parliamentary party who "supported Tony Benn and still do" and "backed Arthur Scargill".

Nevertheless the summer battering had its effect. "It's tough for me sometimes", Mr Blair said." I don't like people telling me that I don't believe in social justice or equality. I do. I believe passionately in these things. It's what brought me into the Labour Party. But I'm fed up of talking about them and not actually doing anything about them."

But Mr Blair claims great support among the "people's party", as he now refers to Labour. He believes that, historically, Labour has been most successful as the party that helped people get on in life, as it did in 1945 and 1964.

Most of those in work now are now middle class, either in fact or in aspiration. He said: "Don't underestimate the extent to which people in the Labour Party have been crying out for the party to be put in the position where we can connect with the mainstream of the country again, and lead it and be the people's party again."

On Thursday evening more than 300 party members had crammed into the same nondescript lecture room at Gatwick's Forte Crest. It was a blend of old and new Labour, the predominance of beards and anoraks replaced by suits and ties.

One member felt Mr Blair had denigrated activists, another described him as "master of the soundbite". But most questions were friendly and the Labour leader was received enthusiastically.

He may be underestimating the tenacity of older activists. Privately, several members of the audience said they joined the party last year but had never attended a branch meeting.

But something is afoot in New Labour. As the host closed the meeting, she offered thanks for the kind hospitality of Forte Crest and the British Airports Authority. The audience of Labour activists responded with polite applause.