Stephen Pollard: Is this the end of the road for New Labour?

Forget, for a second, about George Bush. Forget about Iraq. Forget, too, about the euro. None of these were factors when New Labour was elected in 1997 and 2001, and I would make a sizeable bet that they will not be much of a factor, either, come the next election. Governments are elected not on foreign policy but - and this applies more than usually to New Labour - on domestic policy. New Labour owes its political success to the hope it offered that it would transform public services.

It is for that reason - and nothing to do with President Bush's visit - that this week may come to be seen as the end of the road for New Labour, for Tony Blair, and for the Government as a whole. If the Government fails, as seems possible, to get four of its key Bills through Parliament by tomorrow night, it will, to use Norman Lamont's damning phrase about the Major government, be in office but not in power.

Tonight's Commons vote on a House of Lords amendment to the Health and Social Care (Community Health and Standards) Bill (which enables the establishment of foundation hospitals) is either the beginning or the end for the Government's public services agenda. If Labour rebels succeed in allying in sufficient numbers with the resurgent Conservatives and other opposition parties, any chance of serious NHS reform will be killed stone dead, and with it any claims that New Labour is capable of genuine public service reform. The irony is that the Bill has been so watered down by attempts to pacify its opponents that it is now barely worth the fight, other than as a piece of symbolism. When Alan Milburn first made his proposals, they were genuinely useful and bold. They offered a real possibility that NHS hospitals might be able to develop as genuinely consumer-led, high-standard, efficient organisations. And then Gordon Brown got his hands on the idea.

The Chancellor has a habit of seizing on an issue and turning it into a fight with No 10, in what more often than not seems a fight for the sake of having a fight. One day it is tuition fees, another it is ID cards. And on another it is foundation hospitals, which the Chancellor succeeded in neutering.

So the Bill which is being debated tonight is more important for its de facto symbolism than its de jure impact on the NHS. But in politics, symbolism matters. If the Government wins the vote it will have won a modest policy victory, but a huge political victory, which will lay a path to the possibility of further, more worthwhile reform. If, somehow, the whips succeed in getting the Bill through, there will be some hope left that public service reform might be more than just an empty slogan for Labour.

If it loses and the limited, shackled proposals are defeated, the idea that further reform is possible will be killed stone dead, and with it any remaining purpose to New Labour beyond the occupation of office. If the Labour Party is unwilling to countenance reforms which, to a continental socialist used to continental health care systems, already look archaic, then it is no longer - if, with hindsight, it ever was - a party serious about reform.

Three other Bills are at stake this week - the Criminal Justice Bill, the Extradition Bill, and the Anti-social Behaviour Bill - all of which matter, but none of which carry quite the same weight as the foundation hospitals Bill. There is, though, one further piece of legislation, due to be brought forward in the next parliamentary session, which is, if anything, more important - the university fees proposal.

That, too, has a similar symbolic importance to foundation hospitals but it also has a direct, practical utility. If universities are not able to find extra revenue within the current system, they have two stark choices: they can either accelerate their existing decline, or they can go private. There is no cosy third way, despite the Conservatives' shameful deceit on the issue. The Government may be risking the wrath of the parental middle classes, but it is simply doing what has to be done. You will not find a vice-chancellor who expresses other than contempt for the Conservatives' opposition to top-up fees, nor a numerate politician or sensible policy expert who disagrees with the basic principle.

But as the Government has found out so often since 1997, numeracy and sense are not the most liberally distributed traits on the Labour benches. It is not just parents' wrath which threatens to engulf the Government; its own backbenchers are leading the fight.

It is certainly possible that Charles Clarke will make enough concessions to garner sufficient votes to get the Bill through, but the message will nonetheless be the same as that tonight if the foundation hospitals proposal is defeated: Labour is unable to deliver serious reform.

If the Government is reduced to grubbing the votes of its most backward-looking, antediluvian backbenchers, then what is it in office for? Where is the reform agenda? Gone, evaporated in the hot air with which it was first set out.

The Government is now working flat out on the manifesto for the next election, and the third-term agenda. In the first term, the message was "wait for the second term" for real reform. Now it is "wait for the third term". Tonight we will discover if the game is already up.

The author is a senior fellow at the Centre for the New Europe