Blair says third term needed to achieve 'mission'

Tony Blair coupled an admission that the Government was still spending too little on hospitals with a warning that Labour could need a third spell in power to complete its "mission of change" in public services. He followed his warning this week that taxes would have to rise to meet the spiralling cost of health care with a candid analysis of the condition of the National Health Service yesterday.

Speaking at the Scottish Labour conference in Perth, he urged hostile union leaders to back Labour's "invest and reform" strategy for reviving public services.

Mr Blair delivered a strong defence of the basic principles of the NHS but claimed the country was "engaged in a fight for its very future" in the face of opposition from other political parties.

He added: "On any basis, we remain a relatively low-taxed economy, but there is a price to be paid for under-investment and we are paying it now.

"It is not difficult to work out why other systems in Europe are better – they spend more and they have done for years.

"But there is no evidence at all that French and German health systems are intrinsically fairer, or give better value for money. There just isn't enough of it to go round."

Mr Blair spoke as union chiefs at the conference privately threatened to reject a key policy document on health unless there were concessions on the use of the private finance initiative.

The Prime Minister praised the work of state sector workers operating within systems "often creaking at the seams". But he added: "Reform is their friend, not something to be frightened of."

He hit back at accusations that the Government was sending out "mixed messages" on the future of public services.

"Invest and reform – that is one message. Public services need investment, but money alone is not enough. We also need to change the system so that people see clearly where the money is going and the service is redesigned around the interests of the user of the service."

Mr Blair hailed Labour's second-term victory and claimed the party was on course to be a "radical, reforming government". He listed achievements such as more jobs, the New Deal, cutting the cost of borrowing and debt, the minimum wage and the minimum income guarantee.

But, in comments seen as a warning to unions and left-wing critics not to wreck his planned public service reforms, he also spoke openly for the first time of the need to win the next election, due by 2006.

"We used to say we needed to win an historic full second term. My friends, we also need to be able to win an historic third term too. We need to do it because the values and the policies that we have are the right ones for the people we represent. The opportunities today are indeed immense, but so is the responsibility on us, therefore, to carry out our mission of change."

The Prime Minister stood by his recent round of world trips, derided by the Tories as "designer diplomacy". "It is obviously in the wider interests of the world that we do not leave Africa in the state that it is in today," he told the conference.