Peter Mandelson: What do the Tories want? Tax cuts or good services?

Iain Duncan Smith's intervention in the Rose Addis case typifies his party's approach to the public sector: contradictory, out of touch, confused

Iain Duncan Smith might be thinking as he reflects this weekend that it has been one of the more successful weeks of his leadership. As I know from Labour's days foundering in opposition in the mid-1980s, when your public recognition factor is frankly so low and the common wisdom is that the party you lead no longer matters, it is easy to think that any issue which raises your profile in the media is welcome.

If this is really what he thinks, I fear that the Conservatives have got it badly wrong yet again. To denigrate senior consultants and nurses in an NHS hospital without fully discovering and weighing up the facts was ill advised and displays poor judgement. It was hardly the act of a Prime Minister-in-waiting, more of a desperate fringe group prepared to perform any stunt to buy them airtime. That is certainly the view this weekend of many of my Hartlepool constituents, whose instincts I trust.

But there is a more fundamental reason why I believe that Mr Duncan Smith and the Conservative Party are getting it wrong. These populist attacks not only alienate the millions of people working in the public sector, they also perpetuate the confusion about what modern Conservativism stands for. Today the Tories exist in an ideological vacuum, a political blank slate without fixed ideas, in which policies are changed from one day to the next without any proper consideration, hard thought or argument.

The position that Mr Duncan Smith has adopted in relation to the public services is confused. He and his Shadow Chancellor had begun to make some interesting noises. First, in a Commons debate before the Christmas break, Michael Howard appeared to drop the Thatcherite commitment to tax cuts before increasing expenditure on public services. Investment in public infrastructure was a priority for the modern Conservative Party, he conceded, and this would be reflected in future fiscal commitments.

There were warm words, too, for public servants from Mr Duncan Smith, who praised their sense of vocation in a series of speeches, and made it clear that the Conservatives would cut back on red tape and allow front-line staff the space to exercise professional autonomy rather than constantly responding to directives from Whitehall. It was not clear how they would do this or whether they had even begun to think through the difficult and complex issues about remodelling public organisations. But at least they were showing some concern for the fate of public services – surely necessary if they were to begin the long march back to office.

Then, just when you thought the Conservatives might at last be adopting a coherent, consistent position, the leader briefed the Financial Times that he intends to follow through on his commitment to reduce public expenditure as a proportion of GDP to 35 per cent. This threw his new-found praise for the public sector into complete disarray. If you really believe in the NHS, decent schools, crime-free streets and a public transport system that works, you have to concede that whatever reforms are necessary, more money is required too.

This is a commitment that the Conservatives are not prepared to make. Because they have no clear analysis of the state of modern Britain, they remain fixated first by tax cuts and, second, by the desire to roll back further the frontiers of the state. Mr Duncan Smith, it turns out, is trapped in a Thatcherite time warp. His sense of priorities is totally out of step with the public's. But, as the events of last week showed, the situation is worse, for in his subsequent remarks he has not even stuck to this position. The Tories are, not to put too fine a point on it, all over the place.

That is not to say that the Government has always succeeded in spelling out its reform programme with precision or clarity. In certain instances the Government's position has been somewhat blurred. Ministers have repeatedly made clear how much they value public services, that they are central to this Government's mission to build a Britain that is more economically prosperous and socially just. But they assert this while at the same time sending out the message that these services are not good enough and must be changed inside out. They have allowed the Government's position to be portrayed wrongly as a belief that private involvement is the only solution.

The Prime Minister's speech on Friday, alongside recent pronouncements by Alan Milburn about a decentralised NHS prepared to rethink its Bevanite legacy, have injected some much needed clarity back into the debate.

Last week's clash should enable Mr Blair to define further the choice that faces the British people: between Labour's determination to invest and reform and the Tory desire to seize on the inadequacies of public services so that they can sell their view of quality education and care for those who can afford to buy them and a lower-tier alternative for the rest of us.

Mr Blair and his ministers have shown that they are ready to defend our public servants. Quite rightly they have derided Mr Duncan Smith's attempts to suggest the Tories somehow support the NHS while undermining the professional judgement of those who work in the NHS tirelessly, day in and day out. As the Prime Minister said, if you are on the side of the patient, then you also have to be on the side of the nurse and the doctor because they are the ones who are delivering the improvements we all want.

There is a risk in this, however. The Prime Minister's language might be misrepresented as a return to the producer-led public services of the 1970s in which the NHS, schools and railways are run for the convenience of the system, not the user. That's the label the Tories were so desperate to pin on the Government last week and it was echoed, not for the first time, by some on the left wandering into the trap.

But Mr Blair will not give them the chance to misrepresent the Government's reform agenda. He is a New Labour leader who has made it clear that reform is every bit as important as investment.

There were, of course, many in the public services – and beyond – during our first term who believed investment was all that was required. The vested interests of left and right regarded all reform, let alone the involvement of the private sector to improve public services, as wrong or futile.

I believe that attitude is changing quickly. There is a growing recognition that our public services must be reformed around the needs of their customers. The public has known this for some time, as increasingly do public servants. Some of those groups most hostile to these changes because of years of underinvestment and neglect adopted a defensive attitude. But in recent months they have shown a new understanding of what the Government is trying to achieve and signalled that they want to work in partnership to do it.

When the media frenzy around this week's NHS row clears, as it always does, attention will focus back on the fundamental choice for the country. Between reforming public services so that they are effective and available to all at the point of use, a source of security and a ladder of opportunity in a changing world. Or confusion and lack of direction under the Conservatives, punctuated by the sort of desperate populism we are seeing now, resulting ultimately in cuts and the further denigration of our public services.

Peter Mandelson is MP for Hartlepool