Thank you, thank you very much indeed. I’ve not even left yet! It’s actually a fantastic pleasure to be with you on this 10th anniversary of Progress and to congratulate everyone who has been involved in Progress over the past 10 years, because you’ve done a great job in putting forward ideas and pushing at the frontiers of new thinking inside the Labour party.

Well I suppose I should begin with the last week really. There is bad news and good news. You’ve all thinking: what’s the good news? The bad news is that there was something sort of irredeemably old fashioned about it, I’m afraid. The attacks on the leader, the leader responds, the briefings, the counter-briefings, the statutory trade union out at the end of the week saying the leader has got to go. The only thing we didn’t have was the smoke-filled room and that’s because we banned those. So that’s not the way to do it. The good news is that we’re three years away from an election and we can remake ourselves. But we can only do it, not by behaving like we did last week, but behaving like we did when we were hungry for power before 1997 when we understood that what mattered in the end was the people and the country, not ourselves.

And we’re not going to win if we have personal attacks by anybody on anyone, because it turns the public off and makes them think we’re interested again in ourselves and not in them. But we can win if we focus on ideas and policy and if we face out and not face in. When I say face out I don’t mean that we don’t have an internal debate, because of course an internal debate about the leadership or an internal debate about policy is necessarily something where the party looks at itself. But the important thing about facing out and how we used to face out, even when we were discussing internal matters, is that the connection that we’re looking for is not between ourselves, but between ourselves and the public to whom we are ultimately accountable. That’s the key thing. And the reason I remain, despite it all, confident, is because, on policy and ideas, we are strong, we are actually ideologically united. The Tories are weak and they are in fact ideologically divided. So there’s no reason why if we behave sensibly we can’t, even after what’s happened, put it behind us and move on, and we should.

Now, when we talk about policy and ideas, there’s a very common misconception which some of the Labour party have, a lot of the media have and actually funnily enough the Tories have as well, which is that New Labour was created essentially by – we got a few spin doctors, finally hired the right pollsters and strategists, we put together a little bit of PR and then, hey presto, we went and won the election. Actually New Labour was the product of myself and Gordon sitting down over a long period of time and working out not just the ideas and the policy but the philosophical structure in which a modern Labour party would govern – and not govern as a reaction simply to an unpopular Conservative government, but govern on our terms over a significant period of time. And the result is three terms of government. Now, part of the problem is we’ve never been in the third term of a Labour government, in fact we’ve never been in two full consecutive terms, in fact for most of our 100 years of history we’ve been in opposition. Even when we were winning it was always kind of pretty fragile as to whether we could go on and win further. Now I think the reason why we won was New Labour, but I don’t mean that simply in terms of me, or the concept or the branding of New Labour. It was at its heart I think that for the first time we showed the public how we could marry together economic efficiency and social justice.

In other words, for years, you remember when I was growing up, with my Dad who was Tory, but he always used to say – he was the sort of classic new Tory of the 1970s and 1980s in the sense that he came from a very poor background, he’d been brought very much on the left, but he kind of thought and a lot of his generation thought, once you started to do well you stopped being on the left and you had to be a Tory. So if you own your own home you had to be a Tory, if you start to do well at work you had to be a Tory, because that’s where successful people went. That’s what happened. And, that’s why the old thing when I was growing up, people used to say – I mean you’re too young to remember this Stephen [Twigg] obviously – people used to say, you know, with your heart you might be Labour but with your head you’ve got to be Tory.

So the philosophical construct of New Labour was really to say to people in fact if you run the economy incompetently or you don’t make sure that you’re allied to the new moods that develop amongst people and the new trends that happen in society, if all you’re doing is simply sitting there saying, ‘The world is so unfair and unjust and we’ve got to try and help people’ – that’s all you’re saying but you’re not in the hard-headed reality of things like running the economy, well in the end you can’t actually do the things you want to do for reasons of social justice.

So the whole idea was much more than, as I say, a kind of branding exercise, although it’s important in modern politics to present your party properly, the important thing was prior to 1997 and Clause IV and the re-writing of it was part of this, to say that from now and there’s a new kind of, almost philosophical paradigm for the Labour party, that economic efficiency and social justice go together. And in that of course we were tremendously helped because human capital started to become economically the most important thing. So, actually whereas in the old days of factory productions by people who were doing the widgets on the assembly line and all the rest of it, whereas education might be nice for them but not absolutely vital for the good of the country, education became something that was essential for the economic competitiveness of the country in the future and therefore this idea of personal advancement and opportunity for all became something that wasn’t just a social issue but something that was an economic for us as well.

Now, the result of that was that the record that we’ve engaged in, in these three terms, is strong. Part of the thing about government is that you can’t please all of the people all the time. In fact sometimes I’d like to please some of the people some of the time. It would be a major advance from occasionally certainly where I’ve been. What often happens when you’re in government and this is why parties have always got to hold firm and work out whether in the fundamentals they’re right or they’re wrong, what happens in government is that people obviously tell you what is wrong with their lives and people’s lives are tough and challenging. We kind of think, look at all the things we’ve done – the extra jobs, reduced unemployment and the economy stable – yes, but if you’re trying to buy a house as a young couple in London, you’re struggling unless you’re on a very, very high wage. If you’re on anything like the normal wage it’s a real struggle. So, people have difficult lives, they’ve got these challenges and often they will focus on all the things the government has done wrong.

But the interesting thing is if you go back over these years, and this may just be part of the reason why we’re in government for a third term, actually we have achieved a lot. There’ve been big changes in this country: there’s issues people don’t talk about any more – NHS winter crisis, when was the last one, a few years back. Unemployment – the march for jobs. In constituencies like mine back in the 1980s we often had 40 per cent or 50 per cent male unemployment. It’s not like that any more. When I was doing a programme for Yorkshire TV the other night and we had a panel of five people, for very obvious reasons we were talking about social exclusion, in fact it went broader than that, we were talking about all the different things that were wrong with their lives. I remember just going to each one of them in turn and saying, well tell me something – has nothing got better in the last 10 years? Now if you’d heard what they said up to the point that question was asked, you’d have thought they were completely negative about everything, but actually when you got beneath it, someone said, well there’s been masses of money gone into our schools and that’s made a difference and someone else was talking about the money that’s gone in for regeneration. Another person was talking about the issues to do with the economy and the health service and so on. So in other words, when we look back on our record, it’s actually a very strong record of achievement. Now we’ve got to go out and sell that and explain to people how it’s come about. And we’ve not got to be in the least complacent about it or trying to suggest to people there isn’t still a massive amount to do. But the fact is, there’s a lot that we can be proud of.

So, the reason I still have confidence is that in the fundamentals we’re strong. The creation of New Labour was much more about fundamental, philosophical and political realignment than it was just about branding and we’ve got a strong record. However, what do we now have to do? The first thing we realise or should realise is that we’re in the 10th year of a government and in 2007, take it next year – no particular reason obviously, I don’t want you guys in the press reading anything into that – part of the trouble with speaking in the present set of circumstances, especially when I’m not reading a speech, is that you’re aware every single word is minutely pored over usually with 15 different meanings ascribed to … you’d have thought would have learnt by now I just say the first thing that comes into my head! But anyway … that also is a joke incidentally!

If we take it 10 years on, the first thing we have got to realise in this process of renewing our party and making sure we remain in government is to realise that the challenges we face in 2007 aren’t the ones of 1997. The danger for us is that we carry on thinking, well we just do what we have been doing for the last 10 years. Actually in some ways of course, in terms as I say of learning the lessons from how we won power, that is true. But in terms of the future challenges for our country, 2007 is different from 1997. And the way that we will remake ourselves therefore is as I say not by engaging in personal attacks and all the rest of it and the type of stuff we’ve seen in the last week, but actually sitting down as a political party in the way that we’re doing at this conference today and saying, what is the right analysis of today’s world.

What are the challenges that face us, what is the new set of policies and ideas that allow us to continue that marriage of economic efficiency and social justice, but in a changed world with changed challenges? Now, what does that mean in specific terms? What are these new challenges? I mean, I will over the next period of time try and set some of these out and in particular with the first one I’ll try and do that next week. But what are these challenges?

First, if you’d talked about terrorism in 1997 people would have talked about the IRA. Now, Northern Ireland I’m very pleased to say is in a very different state today than it was in 1997 and let’s hope we can complete the peace process there. And incidentally, if anyone ever gets downhearted about peace processes around the world, and it’s easy to be so, particularly with Israel and Palestine at the moment, we should remember 10 years ago it looked as if Northern Ireland couldn’t be resolved and actually now we know that it can be and we hope that it will be.

But the terrorism today obviously is completely of a different nature. To do with this perversion of Islam, carried into fundamentalist extremism. There is the issue of migration, today, which is a huge challenge. Let’s be absolutely clear – out there in the country, the issue to do with immigration, our own borders, who comes in, who doesn’t, what are the plusses and minuses of migration policy – that is a major question. Now again, it’s a question to which we have got to have the answers because most of us, and I certainly believe, that we have got to have a strong system of rules so that migration is controlled, so that we know who comes in and who goes out of our country, but at the same time, we have to understand the benefits that migration brings to a modern economy. And there is a dynamism and an innovation and a creativity that comes with migration, that is actually one of the reasons why this country is a successful economy today. But let’s be clear, it’s a tough argument for the public out there.

Now, we’ve got to be prepared to make sense of this terrorist threat, to make sense of the issues of migration and immigration and legal and illegal immigration and present a coherent picture to the public of where we stand. There’s the whole liberty and security debate. Now that again happens in a completely different way partly because of terrorism, but also partly because of organised crime, because of antisocial behaviour. You go to people out there – what do people feel? They feel that there are many great things about modern society, but they also feel there is a lack of respect, a lack of care in the way people behave towards other people, antisocial behaviour on their streets, what happens outside their front door is the most important thing to people. They’re living their lives, they’re in their homes, they’re trying to raise their family, what actually happens outside there is important to them.

Now, here’s the problem. If we have simply the traditional processes of the criminal justice system, my view is as I’ve said before, we’re not going to solve this problem – we’re not going to make it work. We need not a different balance between liberty and security but we do need to understand what civil liberties means in today’s world when the civil liberties of people who simply want to be able to live in their own homes and their own communities free from fear are being severely challenged. Now it’s a difficult debate. It involves changing some of the fundamental things that people and lawyers – and I should know I’m married to one, in fact I was one a long time ago – but all of those difficult issues we have to have the answers to. We have to be able to construct the terms of the debate in which that argument takes place and get to the right answer.

If you take the welfare state. Look, it’s very simple, every single country around the world faces this challenge. People are living longer – it’s good, it’s fantastic, and it also means that the pressure on pensions is significant. Pensions in 1997, I mean I haven’t actually checked this specifically, but I bet if you went back through my speeches in 1997 you would find that the references to pensions were about pensioners. You would not have found it, except probably as a little astrix with the little footnote, about pensions, people of working age and their pensions. But today, that is the question.

That question also follows on this, which is: if you want to pay, because we’re saying that we’re going to re-link the basic state pension with earnings, which is the right thing to do with a simpler system for people to save in. Interestingly, that’s an example of change. In 1997, and perhaps you shouldn’t go back and look at what I said then, on this, I probably would have described that as an old Labour idea. But, the times have changed and actually maybe today you do have to have that strong foundation linked to earnings that the state provides and a simpler system for people to top that up from their own individual thrift and hard work.

But my point is very simply this – a) that argument happens in a completely different way from the way it happened 10 years ago and b) unless we actually make sure we have enough people in work, we can’t afford that public provision. So, the reason why welfare to work, and we’ve done a lot on it but we need to do an awful lot more, is that system with 3m people economically inactive, is probably not affordable. So, that’s a different challenge, happening in a different way that requires us again to update our thinking.

Our public services: my view on public services is absolutely simple. We need good quality public services that are available to all on the basis of need, not wealth. But, if as we have done, we have put massive investment into our public services and remember this is a country 10 years ago that was way below the European average in terms of public investment, 10 years ago we’re about at the European average or will in the next couple of years with the extra funding. People will start to say, indeed do say, I want to know what I personally am going to get out of this improved public service. And public services themselves because of all the changes they’re subject to, they’re going to have to be far more adaptable, far more flexible, far more capable of what I call self-perpetuating innovation.

Now, that’s the reason why for example, we have to give far more personalisation of the public services. It’s why we’ve got to break up the old monoliths, it’s why we’ve got to use for example the third sector and voluntary sector in order to deliver, not simply the old public sector in the same way, why the independent sector has a role to play. Now again, the challenge in 1997 was under investment. The challenge today is not simply under investment, of course there are still issues there but actually it’s moved and we therefore have to move in our response to it.

And then, we have business and business competitiveness. We produced economic stability – fantastic advance. But if you want your business to remain competitive in the future, you’ve got to be saying, where’s the next generation of businesses coming from. That’s why I keep saying to people, science for example, even things that seem tangential like stem cell research, are really, really important parts of how you create a modern knowledge economy.

Internationally of course the challenges are absolutely clear. We’ve decided over the past few years to be open and internationalist, whether it’s in trying to tackle terrorism or rather it’s in trying to handle other difficult issues. For example, climate change, for example, debt and aid, where this country has literally led the way. But again, over the next 10 years, those challenges are going to be happening within a different framework. You’ve got the rise of China, which is the single most dominating issue, both economically and politically in terms of the geo-politics of the world. We’ve got to have the responses to that.

Finally of course, energy policy. How big was energy policy in 1997? I mean I know again you can probably go back, you’ll see it all in the manifesto and so on. But energy policy at the next election, I just tell you this, will be one of the main issues. Security of supply, climate change, it needs a complete re-casting of that entire debate and argument.

So, what does that really mean? It means that the way to win is actually to do what we did before 1997, but do it for 2007 – go back to an analysis of the world and how it has changed, construct a proper list of the challenges the country faces and meet those challenges by the combination of tough decision making in the interests of modernisation and compassion in the interests of fairness, so that the benefits are spread to everybody. That is the combination of basic values, fairness, opportunity for all, belief in community and society, allied to the future – how the world is changing and the difficult decisions to get there.

One final point I want to make on this. The way of doing this too, and here’s where in a curious way it’s, I was going to say it’s an advantage to be leaving, but then people may think there are many advantages by leaving, I think that the way of doing this and this is perhaps something that I want to share on the basis of my experience trying to do the job these past 10 years, is that when I said at the beginning that the last week had been kind of irredeemably old fashioned, the way that we then engage has got to be emblematic of a different type of politics that we’re prepared to engage in as well.

And the problem with being in government, it’s perfectly natural, but you’re always on the defensive. It’s just the way government is. You’ve got to hope that you get on to the offensive at some point before an election. But we’ve got to be unashamed and unafraid of going out and making sure that when we have this internal debate, we’re involving not just the cabinet, not just the party, but the people. And doing it, and making policy, in a different way. Not a sort of little policy commission where you know, we have a few trade union guys here and a few members of the Cabinet there, and a few sort of party people there, and we all put it together and do it on the basis basically of what you know the leadership has decided already. Not that we ever did that all … well there were times when it got a little bit close to that and sometimes necessarily actually.

But, going out and building the stakeholders out there – and there are many of them now after a period of government – who kind of share the basic direction, share the basic values, but they want to be part of this process of change. And the reason why we should be confident about it, is that there is no fundamental ideological divide in today’s Labour party. Look, I have been in the Labour Party, many of you have, when there was a fundamental ideological divide. When you were going to party meetings and you would think, we’re in different worlds here, you know actually that was quite lucky. It was different solar systems often. And you would have this debate and you really would wonder how on earth were we ever going together at all at the end of that.

Now, I think today’s Labour party, you know people often say I’m the only person who’s New Labour in the Labour party, it’s rubbish. The Labour party basically today is in that modernising progressive position. I’m not saying there aren’t people who want to go back to the 1980s, but I think they are a very, very tiny number. The vast majority of people actually want to be around that modernising progressive position. The danger for us, funnily enough, is not that people depart from position but that we don’t reassess what that position means for today’s world. You know we get complacent about what we’ve done rather than what we needed to do.

That is the key for us and we’ve got a very simple choice. We can either, after the kind of spasms of last week, retreat into personal attacks and all the rest of it and then as I say a very old fashioned type of politics, or we can say, we are going in a mature, intelligent and capable way, to describe to the country what we’ve done, the values that lay behind it, the challenges we now face as a country, and how we meet those challenges. If we do that, we will win. And we will win for a very simple reason. The other thing that I have learnt in my time in politics, never mind my time as Labour party leader, in the end, the people usually get it right. What the people out there want to know are the answers to their difficult questions and the challenges in their life. What they don’t want is a whole lot of politicians talking to themselves.

So, we go out, we face out to the people, we succeed. We face inwards, we lose. It’s a very simple lesson and actually that’s not a New Labour lesson or an old Labour lesson, that’s the lesson of politics. Thank you.