Steve Richards: Mr Prescott has joined forces with Mr Brown

'Mr Prescott's friends suggest he intends to stay in government to ensure the Chancellor gets the crown'

John Prescott keeps a low profile these days. No longer directly responsible for transport, no longer directly responsible for any policy, the Deputy Prime Minister tends to range widely. Sometimes he seems to be ranging so widely that he is nowhere to be seen at all. Yet Mr Prescott, with his deep roots in the Labour Party and his access to Tony Blair, is still a player of some influence. He still matters.

This week he made a speech of much greater significance than some of the over-hyped announcements that commanded the front pages. While Alan Milburn and Stephen Byers were offering little detail about how the private sector would help to revive the public services, Mr Prescott addressed the thorny issue of improving standards in poorer communities. Unlike his high-profile colleagues, he linked detailed policies to broader principles. There was not much waffle in his exposition.

But what made Mr Prescott's speech truly potent and potentially explosive was the wider political context. The words were supposed to have been delivered by Gordon Brown, who had to pull out for obvious family reasons. The background to the speech was this. The Fabian Society – increasingly innovative and dynamic these days – originally invited Tony Blair to speak at its conference on social justice. Mr Blair was unavailable, but Downing Street proposed Mr Prescott in his capacity as the minister responsible for the Government's overall approach to social exclusion policies. Mr Prescott agreed, but suggested that Mr Brown came along. Under different circumstances, both would have addressed the conference. Like most senior ministers, Mr Prescott has a well-developed sense of vanity and is protective of his turf. But he had wanted to share the stage with Mr Brown, and praised him warmly in his absence.

There is an increasingly strong bond between Mr Prescott and Mr Brown, one that could have long-term implications for the future direction of the Government. Mr Prescott, with close allies in some trade unions and an easy rapport with party activists, is likely to be a key Brown supporter in a future leadership contest. Some of his friends go further and suggest that he intends to stay active in the Government partly to ensure that Mr Brown gets the crown when the opportunity comes. He has no more personal ambition, but is still deeply ambitious for the Chancellor. More immediately, he is an important ally in Mr Brown's policies for welfare reform, policies that do not have by any means the wholehearted support of the Cabinet.

In articulating Mr Brown's agenda, Mr Prescott put the case for what he called "progressive universalism". Almost certainly, Mr Brown would have coined this phrase. The words have a similar ring to the Chancellor's ambiguous phrase for the single currency. Last autumn he declared he was "pro euro-caution", a phrase that managed to sound simultaneously positive and doubtful about the euro. Similarly, "progressive universalism" suggests that policies towards welfare benefits are changing and not changing at the same time.

Roughly translated, what it really means is that Mr Brown is steaming ahead with his plans to end universal benefits in any recognisable sense. Or, as Mr Prescott put it in his/Mr Brown's speech: "A guaranteed minimum for everyone; more for those who need it most".

In other words, the Government is in favour of targeting, or means-testing through other methods. There will be a minimum for everyone, but the bulk of the welfare budget will be focused on those who need it or deserve it. For the elderly, that means more cash targeted on the poorer pensioners, leaving the universal pension to decline in value even more. Similarly, Mr Brown is keener on focusing resources to encourage the unemployed into work and to reward the low-paid than he is on simply increasing unemployment benefits. In an earlier phase, Mr Brown also floated the idea of changes to the universal child benefit, although there is no sign of that happening in the near future.

In the speech Mr Prescott/Mr Brown highlighted the tax credit system that benefits the low-paid and the poorer pensioners, as well as the minimum wage and the minimum income guarantee for pensioners. Mr Prescott was putting his weight behind Mr Brown's tax credits at a time when several cabinet ministers are fuming about them. Messrs Milburn, Byers and Blunkett have been known to curse the credits when they seek additional cash from the Treasury. Outside the cabinet, Peter Mandelson has noted in private that the Government gets no political credit for its tax credits.

Tony Blair, too, has had his doubts about the strategy. The biggest U-turn that the Government has made was his decision to give a substantial rise to all pensioners before the last election. Mr Blair made one of his famous apologies over the original plan to increase universal pensions by only 75p a week, as if it was a mistake. The policy was not a mistake at all. It might have been politically insensitive in the run-up to a general election, but it was entirely in line with Mr Brown's approach, which was to target the resources on the poorer pensioners. In spite of this change of direction and the internal battles within the Cabinet, the strategy for combating poverty has been one of the Government's more noted successes. Early in the first term, Mr Brown announced the Government would help people get into work, reward those in work who were poorly paid, and give support to those "incapable of work". A whole range of policies from the minimum wage to the more generous tax credits have been applied to the principles.

Typically, Mr Brown has over-hyped the success of the policy, claiming that a million children have been taken out of poverty. This particular sleight-of-hand involves a comparison between the number technically in poverty and the likely figure if trends had continued along similar lines. The actual number is closer to half a million, still a substantial achievement: an example of an active government encouraging people to help themselves and making generous provision for those who cannot.

But if Mr Brown has over-hyped the outcome, he has kept fairly quiet about the means, while the rest of the Government tends to stay off this agenda altogether. Perhaps out of fear of appearing "old Labour" or being tagged with the censored notion of "redistribution", ministers prefer to talk vaguely about their plans for the private sector.

They should be more forthcoming. As the weekly tirade from Lord Hattersley demonstrates, this is a fresh agenda, a step ahead of the old Labour support for universal benefits irrespective of wealth or capability of work. Here is a new Labour narrative that manages to be coherent and substantial, as far as it goes. Whether it goes much further depends on the will of Mr Brown, backed by heavyweights such as Mr Prescott.

There will be some mighty battles to come. Yet even now most of those from poorer areas who have benefited from these distinctly new Labour policies have no sense of what is happening. The Government has a good story to tell and chooses not to tell it.

s.richards@independent.co.uk