John Prescott: 'They might change leaders, but the Tories haven't really changed a bit'

The central European countries that joined the union last year stand to gain billions of euros in EU subsidies and were alarmed when, in June, Britain helped block a new EU financing deal.

Hence Mr Prescott has already been to Poland three times and found himself addressing a large crowd at Gdansk on the 25th anniversary of the Solidarity union movement which unseated the Communist regime in the 1980s.

Unorthodox Prescott diplomacy seemed to do the trick. He recounts: "I said, 'I was in the [British] seamen's union when you guys arrived. We used to have annual meetings with the seamen from Poland. They were great guys: captains and seafarers. We discussed business, had a few bevies and we enjoyed that. Then Solidarity came and what did you send us? Two bloody university lecturers. They didn't know much about the seafaring but we found they liked the old vodka, so we found common ground'".

Mr Prescott is speaking in a small suite at the Meridien hotel in Brussels and, despite the respite from domestic politics, he has not forgotten his opponents.

Globalisation has, he says, speeded up the debate, adding that "the Tories are talking about being for the many and not the few, and social justice, it is a bit bewildering to keep up with it". He says of the Conservative leadership race: "I was worried when it looked like David Davis wasn't doing very well. I did think of sending him a 'get well soon' card. But I do hope he wins. They [the Tories] might change their leader every other year. But really they haven't changed a bit.

"For them unemployment is still a price worth paying. For them slashing investment in our public services is still a policy worth pursuing. So it's important we keep on reminding people again and again that they have not changed."

Mr Prescott is in Brussels for talks with senior MEPs and regional officials on the British presidency of the EU and he concedes that the UK has had to battle to win over its critics. In June it was seen as a main wrecker of the deal on the EU's budget for 2007-13, and was thought to be dancing on the grave of the European constitution. Since then Valery Giscard d'Estaing, the former French president, has accused Britain of inactivity, a charge that Mr Prescott strongly rejects.

The next test comes in 11 days' time when European leaders meet at Hampton Court for a one-day summit on globalisation and the European social model. When it was planned Tony Blair expected to be welcoming a strong, new free-market reformer in Angela Merkel, Germany's new Chancellor. But election results have shackled her with a coalition government. So can any common ground be struck with critics of the Anglo-Saxon economic model? Mr Prescott believes Margaret Thatcher's legacy is something of a curse and has spent much time "pointing out that the Anglo-Saxon model is not necessarily the Thatcher you all knew".

The Prescott message to the rest of the EU is: "The British model is one that is quite acceptable and measures pretty well against the bloody lot of you.

"Compare our economy in growth, in investment in public services. And the level of unemployment was announced as the highest recorded level of employment we have had in Britain for 50 years." The Hampton Court summit will not take decisions, but Mr Prescott thinks it needs to provide vision.

His argument is that more things bind Europe's different economic approaches than many believe. He argues: "The one distinctive thing about the European approach, both right and left, is the belief that the social dimension goes along with the economic. The American model might produce more jobs, but it couldn't really care a damn about the social justice.

"Can we maintain social values and economic prosperity? Europe is the only one that does it from the Nordic area to the Mediterranean, and those values have come together. There isn't any other continent that maintains the same approach." His priorities are "full employment and social justice" and "at least you can point to what it means: you want to get people back to work, it means training and helping them, it means the right to an education and hospitals and welfare".

The mascot of Old Labour chuckles ironically as he deploys his best Blairite lexicon to describe the British approach to the EU. "What we've got to do," he says, talking about the European social model, "is to find traditional values in a modern setting".

The good humour will be put to the test in December when, at another EU summit, the heads of government try to broker a deal on how to fund the EU between 2007 and 2013. It was a row over Britain's annual €5bn budget rebate that caused the collapse of the June summit.

One suspicion in Brussels is that, to help save cash and smooth a deal, the UK will propose cutting regional subsidies to all but the poorest countries. On the contrary, Mr Prescott points to the need to help pockets of deprivation which, because they are in rich regions, do not qualify for EU cash. Mr Prescott warns that if such differentials continue "we will see the kind of unrest we witnessed in some cases in Britain, like Oldham, in Birmingham, Liverpool, Bradford".

Indeed Mr Prescott believes switching money from the Common Agricultural Policy (CAP) to targeted regional funds - including urban centres in old member states - might prove part of a budget solution in December. But he accepts that it will be difficult to reach a deal, given the entrenched row between Britain and France. In June Mr Blair made a barnstorming speech to the European Parliament, promising to put the budget rebate on the table, but only if there is further reform of the CAP. France, the biggest beneficiary from farm subsidies, is their staunchest defender and the biggest critic of the rebate.

Mr Prescott argues: "The French are going to scream in every direction, they are not looking to any movement, I think we expect that anyway. We have to wait and see what happens about that. The French have usually painted us as the enfant terrible. But I think a lot of people have felt what the French have been saying is very much a vested interest." Mr Prescott believes the poisonous relations between Mr Blair and Jacques Chirac can be overcome. He says: "To have a row, when you have gladiators like that, somebody wins, somebody loses, but nobody gains in the end. I don't think it helped. Even Chirac knows that we both have strong positions, but that it is a different Europe now. It is not 15 nations, it is not 10, it's 25. It's a different ballgame."

He says he sees signs of movement, and providing there is CAP reform, he would be happy to see the rebate go. It compensated the UK for its big contributions to agricultural subsidies, he argues, rather than resolving them. He says Mrs Thatcher "got a lot of credit" for the rebate, but he adds: "I think we were sold a pup when she did it. This time I think Blair is embarking on something more fundamental than taking the cheap option." Mr Blair "has said 'if you reform the CAP, we will deal with the abatement and put it on the table'. That is what's going on as a discussion now."

Mr Prescott believes that the conjunction of talks on world trade in Hong Kong in December and the EU's own internal finance negotiations is fortunate. If, ahead of World Trade Organisation negotiations, the US offers further farm subsidy reductions, the EU may be pressed to respond, unlocking a deal on the EU budget.

He says, it may be that "the Americans are prepared to move on agriculture subsidies, and challenge us, and won't do it unless we do". In those circumstances, perhaps the EU "can bring itself to say, OK, let's make a real go of this" and respond.

Mr Prescott grins as he uses an expression that provoked a storm when he deployed it in the context of relations between Mr Blair and Gordon Brown. "If I may use a phrase that got me into a lot of trouble before," he says, "the plates appear to be moving."

The CV

* BORN

31 May 1938, Prestatyn

* EDUCATION

Ellesmere Port Secondary Modern; Ruskin College, Oxford;

BSc in economics and economic history at the University of Hull

* CAREER

1968: Official, National Union of Seamen

1970: Elected Labour MP, Hull East

1972-75: Council of Europe member

1976-1979: Leader of Labour Party delegation to the European Parliament

1983: Shadow Cabinet

1994: Labour deputy leader

1997 Environment Secretary, Deputy Prime Minister

2002 Deputy Prime Minister