I'm still here, my dear

There ought to be something terribly poignant about it. A woman who will be 86 next Sunday, whose eyesight is poor and and who frequently apologises for being tired, is waging a campaign against the Labour leadership over pensions. She will take her arguments to the Labour Party conference this week, and she will stand on the rostrum looking small and frail, arguing for policies she made in another era. People will remember what she was like in her glory-days.

There is nothing poignant about it. Barbara Castle knocks back a couple of gin and bitter lemons before lunch, smokes her cigarettes and, occasionally, thumps the table in fury. She may be physically frailer than she was, but she has lost none of her combativeness or grit. She's enthusiastically back in the fray, seeing off the Newsnight crew from her house in Buckinghamshire, setting up the On The Record people for tomorrow, breaking off this interview to rattle off another with Tribune - and all the time raging, raging against Harriet Harman and what she sees as New Labour lethargy in the face of the erosion of the welfare state.

In the coming week, this tiny old woman could pose a significant symbolic threat to the Labour leadership. She will speak before Gordon Brown at the Tribune rally and from the floor (the party managers won't stop her) in the social security debate: "Oh God, I wish I could speak after Harriet Harman! She'll do the winding up, I suppose." In the highly charged and often sentimental conference atmosphere, her passionate defence of pensioners and her eloquent hatred of poverty will hark back to a time when there was poetry in Labour politics; when there was an enemy, and everyone knew who and what it was.

Baroness Castle of Blackburn will offer a potent focus for old Labour - arguing for universal rather than targeted benefits, and doing it against Harriet Harman, the target of much old-left hostility. After yesterday's deal between the Labour leadership and the unions, sweeping the issue under the carpet of a commission, she is unlikely to inflict a defeat on Tony Blair, but she could still be the cause of some very bad publicity.

Castle first made her proposals a couple of months ago, in a pamphlet, We Can Afford The Welfare State, which she wrote with Peter Townsend, professor of social policy at Bristol University. They include linking the basic pension to earnings for future upratings - a link she originally made herself as Secretary of State for Social Security in 1974, and which was replaced under Margaret Thatcher (to the detriment of pensioners) with a link to prices. She also wants to see Serps restored to its former strength, with a retreat from private pension schemes - which, she claims, are now widely recognised as an expensive lottery.

Harriet Harman insists that all this would be "highly costly". Last week she priced the Castle-Townsend proposals at pounds 5bn, or an increase of 2.5p on the basic rate of tax. When Barbara Castle received this news, she was seized with fury. "They're bloody liars, darling. They produce different figures every time they open their mouths." Castle herself has costed her plans at pounds 3.5bn, most of which she believes can be met out of the surplus in the National Insurance fund created by the disparity between earnings-linked contributions and price-linked payments.

"She's inflated the figure to pounds 5bn? She's not gone through the government actuaries, as we have. She can't prove our figures wrong. But I can prove hers wrong."

As old and new Labour polarised around the issue last week, the gloves seemed to be coming off. "They're running scared," Castle said. "That's why they're fighting so hard. This is real knuckle-duster stuff." She was referring to the letter Harriet Harman was reported to have sent to trade union leaders, advising them that the Castle proposals could mean that the 10 million people in occupational pension schemes would each have to pay an extra pounds 550 a year because of lost rebates.

Barbara Castle bangs the table. "I want to nail the lie that we want to finance this by removing the rebate. We have no intention of doing anything of the kind. This is a political ploy to alienate the trade unions. Now we'll have to get a letter round to all the general secretaries, telling them it's not true that we're trying to milk the occupational pension funds. Oh dear ... I don't get free postage, and I only have a part-time secretary, paid for out of my own money ... My God, if I got the research help they got, I'd be home and dry."

LADY CASTLE, as she does not like to be known, lives in a long, low house in Buckinghamshire, with flagstones, thick white walls and fine views over the garden and a valley. It is the gathering place for her "large, proxy family" of great-nieces and -nephews.

She is dressed in a pistachio-green suit and a pink and lemon shirt, beneath which a scrap of white lace is visible at her chest. Her make- up is carefully applied and her copper hair magnificently set. Femininity has always been a powerful ingredient in her charm, but so has being a no-nonsense Northerner, unabashed by being a lone woman in a world in which it is impossible to survive without occasionally going for the jugular. Where did she get the nerve?

"I've been very lucky. I've come across a few really helpful men along the way - my father first of all, who exuded values", who taught her to smoke, thinking it modern and unconventional, encouraged her to be a socialist and to speak in public.

Then there was Harold Wilson, who appointed her Minister of Overseas Development, then Secretary of State for Transport, Employment and Productivity, and Social Services; and her husband Ted, who didn't resent her job, though he may sometimes have envied it, and didn't mind having to go to bed when she was still up working.

"Besides, I wasn't going to be pushed around by those men. Why should I? You know, when I first applied for the seat at Blackburn they told me that women would never vote for a woman, but it's a lie."

Always a canny politician, these days she is not above using her age. "You'll have to excuse me, I get very tired," she says when an attempt is made to deflect her from her rant about pensions (which then continues). She is also, however, a conviction politician, who has scarcely altered her position in 70 years. She stands by her pensions legislation - "with my dying breath I'm going to fight this betrayal" - just as she stands by In Place of Strife, her controversial and failed attempt to provide a legal framework for trade union activity.

As Tony Blair has noted, In Place of Strife was "a classic act of modernisation ... It is not idle to wonder how different the history of the past two decades, for both unions and the Labour Party, would have been if Barbara had succeeded." As he also noted, in the same 1993 review of her autobiography: "She will still charm and inspire any Labour audience today."

She may do it this week, riled by what she sees as the leadership's refusal to commit itself to a policy. "New Labour won't come out with a clear statement about what they propose and what it will cost, socially and financially." Harriet Harman's position is that it is preferable to target the poorest 700,000 pensioners. Castle's is that means-testing is demeaning, and a safety net is not enough. "People don't realise that the private schemes are not enough to keep them out of penury in old age. It costs, darling, it costs!"

She has put her proposals to Gordon Brown ("who is, I must say, very charming. He brought his assistant and they promised to send me some documents. I had to ring up and remind them"). She has talked to Chris Smith and Harriet Harman and sent a copy of her pamphlet to Tony Blair. She believes "they are all hypnotised, petrified that they might be thought the party of tax and spend."

Barbara Castle has to clip cuttings and look at them under a magnifying lamp, her eyesight is so poor. She rises at 6am and works all morning, eats at 1.30pm after her gin and bitter lemon and tries to rest in the afternoon. She watches television in the evening - she loved The Politician's Wife and is a fan of Bramwell - and retires to bed early. These days when people ring up to book her for engagements, she is liable to say: "If I'm still here, my dear." Sometimes - when she is looking for something, or talking to the dog - she is recognisably an old woman. But this, rather than tingeing her unswerving, proud and passionate activism with pathos, leaves you feeling you are in the presence of an impressive, autocratic force.

Age has not softened Barbara Castle; she is as politically sharp as ever. She refuses to be drawn on her views of Tony Blair or other members of the Shadow Cabinet. "I want to help Labour to win the next election," she declares, "and I want to do so not only because the Tories are worse, but because we are morally superior." Wait a minute: this is ambiguous. Does she mean Labour is morally superior, or that she wants it to be morally superior? She rises to her feet. "Lunch?" she asks brightly.