Andrew Grice: The Week in Politics

Milburn-Clarke show rattles room at the top

An important event took place at Westminster on Tuesday which, because of the media's interest in the Iraq crisis, did not get the attention it deserved. Alan Milburn, the Health Secretary, and Charles Clarke, the Education Secretary, held a joint press conference to outline their shared vision of public service reforms.

The official version is that the two Blairite ministers happened to be addressing separate conferences at the Queen Elizabeth II Conference Centre, so they thought it would be a good idea to draw together their common themes.

Beforehand, their aides said the press conference was not "an anti-Gordon Brown event". They were, of course, protesting too much. The symbolism of the joint gig was not lost on cabinet colleagues. The Whitehall grapevine buzzed.

Milburn and Clarke share Tony Blair's determination to improve consumer choice and demolish boundaries between the public and private sectors. Brown is more cautious: he insists the role of market forces in the public sector has limits. He is worried that handing more freedom and money to top-performing hospitals, schools and colleges could widen the gap between the best and the rest, creating a "two-tier Britain."

The Blairites reply: "We already have two-tier services; just look around you. Inequalities have widened in the past 50 years. Giving people choice will drive up standards."

The outcome of this will define New Labour, which has always been fuzzy. As Blair told a "Third Way" seminar at Downing Street last Monday: "We must forge a new and distinctive agenda. We should aim to define ourselves positively, not negatively; what we are for, not what we are against." (I winced when I heard this, as Blair has been saying it for years).

The debate about public services is healthy. It is perhaps the clearest sign that New Labour has grown up and no longer lives in fear of headlines about "splits." The Milburn and Clarke show could not have happened in Labour's first term.

The event also tells us about the balance of power at the top. By authorising Milburn and Clarke to advance the case for "bold" reforms which he first articulated at the Labour Party conference last October, Blair is sending a message that Brown, once the overlord of domestic policy, no longer has a veto over reforms. This was illustrated when he lost his battle to prevent Blair and Clarke bringing in top-up fees for universities – Brown's only significant cabinet defeat since 1997.

Commentators such as myself can, of course, become overexcited about the differences. Blairites and Brownites do agree on a lot. Brown is understandably irked that he is painted as an Old Labour opponent of change. In a major speech to the Social Market Foundation this month, the Chancellor sought to knock this criticism on the head. He made a strong defence of the private finance initiative (PFI) and rejected what he called "the left's old, anti-market sentiment" and their "discredited dogmas". But he added: "In health care the consumer is not sovereign." He insisted that "equality of access can best by guaranteed not just by public funding but by public provision" – on grounds of equity and efficiency. How, he asked, could the Government let a hospital go bust?

On Tuesday, Milburn and Clarke challenged the Chancellor's assertion that patients do not have enough information to make informed choices. Milburn called for diversity with different providers – public, private, voluntary – providing NHS services. The idea that poorer people did not want to have choice was "patronising nonsense," he said.

Why does all this matter? It is much more than an arcane dispute. The Iraq crisis dominates our attention now but the shape of our public services will have a much bigger say in determining the next general election.

Nor can this debate be divorced from the strained relations between Blair and Brown and the long battle over succession. It is no coincidence that Brown, Milburn and Clarke are – along with David Blunkett – the front-runners to take over. The outcome will also shape the future of the Labour Party.

* Iain Duncan Smith's support for Blair over Iraq has prompted a dispute between the Tory party and the BBC. On Wednesday, David Dimbleby chaired a 90-minute debate on Iraq. The platform included Jack Straw, the Foreign Secretary. At the last minute, according to the Tories, the BBC invited Charles Kennedy, the Liberal Democrat leader. The Tories protested that they should be represented too. But the BBC dug in, offering only a seat in the audience to Alan Duncan, an opposition spokesman on foreign affairs. The Tories are fuming and I hear a formal complaint is on its way to the BBC.

Meanwhile, Duncan Smith is under fire from Tory MPs worried he is out of line with the public on Iraq. They blame the links he forged with US Republican hawks as shadow Defence Secretary. "We are in a lose-lose situation," one shadow cabinet member told me. "If Blair does well, he will get the credit. If it all goes wrong, we won't be able to criticise him."

a.grice@independent.co.uk