Populist bruiser takes up diplomacy: John Prescott rejects suggestions that he is too hotheaded for the role of Labour leader. Donald Macintyre reports

JOHN PRESCOTT is not behaving like a man who has given up hope of winning the Labour Party leadership, whatever the pundits say. A few days ago, Michael Ward, an old Labour Party friend, gave him, in a rather handsome gesture, one of his two copies of Beveridge's long out-of-print Full Employment in a Free Society.

It sits on the desk in his conspicuously tidy office high over Parliament Square, well- thumbed, a critical text for the next month of fierce campaigning on the issue which Labour's employment spokesman has made central to his fight to become the party's next prime minister.

Mr Prescott is serious about full employment, just as he is serious about remaining in the leadership contest until the end. With more than 4 million electors, the contest may be less predictable than commentators assume.

He argues that even the term 'high and stable' employment used in the 1944 White Paper - and the formulation used not only by Tony Blair but also by John Smith - was a compromise between Beveridge and the Treasury which was determined to keep out specific targets. It was after that, Mr Prescott says, that Beveridge produced a formula of a balance between vacancies and the unemployed - which led to a consensus among post-war governments that any level of unemployment above 2.5 to 3 per cent was too high.

But first, the style of the man. Mr Prescott is a more complex political heavyweight - and no one now doubts what he is after his spectacular rescue of one member one vote democracy at last October's conference - than the populist bruiser he is frequently portrayed as. He is dismissive of the suggestion that he is somehow too hotheaded for a top job.

In 1986, he made tabloid headlines because of what was said to be a Commons spat with Jim Callaghan after the former Prime Minister had made a speech in the Commons which in effect challenged Labour's defence policy head-on. Mr Prescott said he had two conversations with him. In the first 'it was about seven or eight on the evening he had made the speech and I saw him coming out of the Chamber and I said 'so that's let the bomb business run again, then'. And he said: 'Well sometimes these things have to be said, John'. If you're instantaneously in revolt, hot tempered and all that you would have done something then'.

But it was the following lunchtime, Mr Prescott had a plate of tuna salad in his hand and Mr Callaghan passed him in the queue. The headlines about a divided Labour Party had been as bad as Mr Prescott thought they would be and he said quietly to him: 'Well, you've cost us the election then.' A Tory MP heard it and, in breach of all Commons convention, passed it on to the Tory whips, and the rest was history.

Mr Prescott had been on good terms with his one-time leader for years. Mr Callaghan had offered him the job of European Commissioner, but he turned it down because he thought it would finish him in British politics. 'I'm a colourful character . . . I do speak my mind. But there are also times when I can't say everything and I can be as diplomatic as anyone.'

He points out as evidence of his diplomatic skills his unchallenged leadership of the European Parliamentary group - with a membership that spanned left and right - during which he played a highly successful central role in the settlement of the cod war; not to mention up-to-date matters - his co-ordination of a group made up of a trio regarded as being as mutually distrustful as any in British politics, Robin Cook, Gordon Brown, and himself, in producing Labour's paper on private finance for state industry.

But is it not Margaret Beckett who is emerging as the left's candidate? The labels, Mr Prescott implies, may not do the contest justice. 'I've always taken the view, this is the way I operate, this is what I believe in I'll let you make a judgement whether you think that is right or left . . . I've always argued my case. Sometimes I've been accepted by the left and sometimes they've found it unacceptable.'

On the introduction of a 'positive framework of employment rights', in 1986 Mr Prescott broke with the trade union view that the law had no place in industrial relations and it 'was largely opposed by people on the left, many of whom have come round to it'. So too with private finance for public-sector projects. But on Clause Four of the party constitution: 'I was one of the few in the shadow Cabinet who challenged the idea that you need to get rid of Clause Four because it was no longer relevant to political philosophy. If people attacking it are saying that there is no role for public ownership at all, I'm bound to say I do (think there is a role) - in railways and the Post Office, and so do the public . . .'

But he does not share Margaret Beckett's view that the state might retake a stake in the water industry. First, because regulation could be as effective as public ownership; and second, because he would rather spend money on creating jobs than compensating water shareholders.

Mr Prescott will not talk in detail about his forthcoming leadership statement. But it is likely to challenge orthodox economic thinking which he says has 'intimidated' politicians into believing full employment is not as legitimate as other goals. He is not saying manufacturing industry should not as lean and efficient as it can be. The Japanese economy has an acceptable level of employment by combining a highly efficient, exporting manufacturing sector with a private service sector which carries 'more labour than it should.' The solution cannot just be found in macro-economic measures, he says. 'It's to be found in changing the whole social climate.'

He is in a leadership contest. He hints that his rivals have been more reluctant to take part in television debates than he has. He points out that Mr Blair's 'warm words' will be increasingly questioned as the weeks wear on. His main criticism of Mr Blair's 5,000- word statement is that 'it raises questions - it doesn't really indicate the choices you make in policies to achieve these objectives'.

But there is a clear, if subliminal, impression that if he won the deputy leadership contest he could work with Mr Blair, whom he is known to respect. He has identified the deputy leader's role partly as a campaigning and organisational job. But is he not the sworn enemy of the slick presentation beloved of the modernisers? Well, he gave Peter Mandelson a reference when he became Labour's media guru. And he is proud of good presentation, but for him substance matters too. And getting the balance between the two right matters most of all.

'Some people said I couldn't work with Neil Kinnock. I think they were wrong. When I stood for the deputy leadership again they said I couldn't work with John Smith. Well, history has given the answer to that.'

(Photograph omitted)