Brown put a dividing line between Labour and the Tories, not between him and Blair

Gordon Brown has been Chancellor for so long he could probably deliver a pre-Budget report in his sleep. But yesterday's speech was unusually challenging, one that demanded a Chancellor who was alert to several dangers and opportunities. The economic context was darker than usual and the political background was even more multi-layered in its daunting and feverish complexity.

Indeed, the context was so politically turbulent that there had been overexcited predictions that Mr Brown would use the platform of the pre-Budget report to launch an embryonic leadership campaign: Mr Brown had been pushed aside by Tony Blair and his elections strategist, Alan Milburn, and this would be his revenge. The Chancellor is a subtler politician than that. A wholly unleashed Mr Brown at this late stage in the parliamentary cycle would only harm his own ambitions. As far as elections were uppermost in his thoughts, he focused yesterday on the general election scheduled for next May. This was not an event to launch an overt leadership campaign.

Even so, Mr Brown is a fertile politician. He has 10 ideas before breakfast relating to how a left-of-centre government in Britain should seek to win elections and build what he calls a progressive consensus. In the build-up to the 1997 and 2001 elections, those ideas were at the heart of Labour's election appeal. Now that Mr Blair and Mr Milburn are planning next year's election more or less without him, he sought to leave hints here and there of a distinctive Brownite agenda.

He ticked several electoral boxes. The next set of council tax bills will almost certainly be delivered during the election campaign. The high demands earlier this year provoked fury, not least from pensioners. The Chancellor therefore set aside a substantial sum of cash to reduce next year's bills. He also announced other measures aimed at helping the elderly, especially those who are least well-off. Other policies were targeted at those in work or who want to work, with the much-heralded extension of childcare, and more generous paternity and maternity leave.

For much of the speech, Mr Brown established a dividing line between the Labour Government and the Conservative Party, not one that divided himself and Mr Blair. The Chancellor enjoyed himself most when he claimed that the Conservatives were planning cuts of £35bn, in contrast to Labour's spending plans.

But this was about more than the opening of the general election campaign. Beyond the familiar electoral tactics, the Chancellor proclaimed his view of a modern enabling state in which the Government plays a more active role in encouraging work and raising skills, while providing additional resources to allow parents more time with their families. Mr Brown called it a "family-friendly welfare state", highlighting in particular the SureStart schemes, in which poorer families are helped with childcare, schooling, finding work and training. He announced a significant extension of the scheme.

In spite of the breakdown of the relationship between Mr Blair and Mr Brown, this was a statement that in policy terms unites them, and more broadly brings the Blairites and Brownites together. Mr Blair was generous or politically foolish in allowing Mr Brown the platform to outline a progressive agenda yesterday while he was left putting the case for the more bleakly defensive Queen's speech, but there was little in the statement yesterday with which he would disagree. Mr Blair is also a believer in an enabling state. He cheered most enthusiastically when Mr Brown announced the expansion of SureStart schemes.

But that does not mean that we are witnessing a remarkable rapprochement between the two. Relations are dire and are likely to remain so. Mr Brown regarded Mr Blair's five-year plans unveiled in the summer as superficial and iniquitous in their impact on public services. Yesterday, Mr Brown hailed a range of 10-year plans. His allies claim they are the product of much more detailed policy-making.

More specifically, Mr Brown was furious when Peter Mandelson warned about the dangers of gloating over the economy. Mr Brown directly mocked Mr Mandelson yesterday, suggesting that even Michael Howard occasionally gloated about the successes in the economy. On one level this is an absurd internal debate. The idea that a chancellor or any minister should play down progress in the economy is silly. It conjures up a Monty Python type election slogan - "Vote for us. The economy is not doing very well."

But there are serious tensions within the seemingly odd debate. Mr Brown believes that British voters will only come to accept Europe when they are more confident about their own country. He therefore proclaims Britain's economy and sometimes compares it with what he argues are the failings in Europe. Mr Mandelson worries that Mr Brown's approach reinforces Euroscepticism and suspects Mr Brown of wooing powerful newspapers with his leadership ambitions in mind.

There is no doubt that the Chancellor welcomes supportive columns in powerful newspapers. Most politicians do, especially those who want to be prime minister. But for several years he has been developing his themes about what it is to be British in a European context. He first made a speech on the subject in 1999. This is not just a superficial device to woo the Daily Mail and The Sun. The more pressing problem with the Brown strategy is that it is one for the long term, when the Government faces a referendum on the European constitution within 18 months.

Still, for all its evident electioneering, this was a speech with the longer term in mind. Mr Brown's distinctive themes came together at the end of his speech when he called for "a progressive Britain we can be proud of". Recently he has spoken of the need for a progressive consensus. But now he seeks a progressive Britain by linking it to a sense of patriotism.

Whether he will succeed or not in his soaring personal and political ambitions will depend partly on whether his optimism about the economy is justified. Mr Brown has made much of the fact that he can be trusted to run the economy. Yesterday he insisted that his famous fiscal rules would be met and his ambitious public spending plans realised also. Independent forecasters are more pessimistic. In recent years they have tended to be wrong in their pessimism. But when Mr Brown expresses his confidence that they will be proved wrong once again he does so with his fingers crossed. His authority would be hugely undermined if he was forced to put up taxes or cut public spending once the election was safely out of the way.

There has been speculation that after the election Mr Blair will move the Chancellor to the Foreign Office. Mr Brown would rather resign than accept such a move. It is therefore much more likely that he will remain Chancellor for the start of a third term. Yesterday he outlined 10-year strategies in several policy areas. Has he a similarly detailed strategy for succeeding Tony Blair in a way that avoids bloodshed and gives a long-serving government renewed momentum? I suspect not, but his pre-Budget report demonstrated why he remains the most obvious successor.