Let me start with a blunt admission. There are still big challenges ahead before this country has the dynamic economy, first-class public services, safe streets and decent communities we are working for. Life is a real struggle for many people, uncertain, insecure and under constant pressure. And that goes for middle class as well as lower income families.
We as a government should acknowledge this openly. Though we are proud of our record, we are not entitled to claim the job is done. There is a massive amount to do. What we are entitled to claim is: we have made a good start.
Even if manufacturing has been through tough times, the economy is stable, inflation is the lowest in Europe, interest rates half what they were in the 80s and 90s, there's a million more jobs and debt and benefit payments have been hugely reduced.
Even if we still need urgently more teachers, nurses and police, primary schools have seen a step change in results, NHS capacity is at last expanding, 2001 will be the first year in over a decade in which recruits to all three services will rise as the largest ever investment in our public services feeds through.
Though violent crime is still rising, overall crime is down.
Even if three million children still live in poverty, there will be million fewer than in May 1997 thanks to the measures we have put in place.
Even with the fuel duty rises and measures to cut the deficit in the first two years, taxes overall are still well below our main EU competitors and living standards are up over 10 per cent on four years ago.
The Minimum Wage, record rises in child benefit, the Working Family Tax Credit, the ??200 winter allowance for pensioners, the inner city regeneration programme: is it enough to build a fairer society? No. Can we do better? Yes. But it is a start.
Foundations are being laid that are firm. The historical mistake of Labour Governments - to try to transform without first getting the fundamentals right - has been avoided.
Now is the time to show what we can build on those foundations. The first phase of New Labour was essentially one of reassurance - we weren't going to repeat the economic mistakes of the past; trade unions would be treated fairly but without favours; there would be no old-style tax and spend; business would be welcomed as a partner.
We are not going to fight an election again with the financial markets in a state of fright; business alarmed; people worried about whether the nation would be adequately defended under a Labour Government.
But having defined ourselves as a party of competence and modernity, it is time for a second phase of New Labour, defined less by reference to the old Labour Party, than by an agenda for the country, radical but firmly in the centre ground, the ground we have made our own in the past few years, as our opponents have drifted sharply rightwards.
The Thatcherite settlement of the 80s has elements we have kept. But now we can see more than ever before how clear are its limitations. I don't simply mean in policy terms - poor public services and infrastructure, social division etc.
Thatcherism allowed better rewards for those that did rise to the top. But in fact social mobility between the classes, has barely increased or even, in some parts declined. There was no land of opportunity for all.
As a nation, we are wasting too much of the talents of too many of the people. The mission of any second term must be this: to break down the barriers that hold people back, to create real upward mobility, a society that is open and genuinely based on merit and the equal worth of all. To build on solid economic foundations a decent education for all; an NHS expanded to provide security for all and a criminal justice system modernised so that it targets the hard core criminal.
Such a society can only be based on a radical extension of opportunity, matched by a true sense of responsibility. The talent of the people has to be set free, not from the 80s problems of too much state interference, inflexible labour markets, too high taxes for top achievers; but from problems Mrs Thatcher failed to tackle: the bonds of second-rate jobs and poor rewards for middle and lower income families; inadequate education and skills; a passive welfare state; weak competition; the insufficient reach of the new technology to all parts of the country; regional industrial decline, broken down communities; public services suffering under the twin problems of chronic under-investment and outdated methods of working; and a society and economy still too tied to old ways of doing things in our business, in our professions and even in our civil service just because it has always been done that way. These are the barriers that hold people back. These are the things we have only made a start in improving. Their removal is the only way of clearing the path to a society in which everyone, not just a few, get the chance to succeed.
But none of it can happen without us choosing as a nation to make it happen. Just go back to the foundations for a moment.
The foundations of a strong economy have been put in place as a result of the choices we have made - Bank of England independence, tough fiscal rules, spending kept under control. Britain is now getting its economic confidence back. Tough decisions are paying off. The longest period of low inflation for over 30 years is matched by the longest run of low interest rates for over 30 years, with mortgages costing people ??1000 a year less than under the last government. And this April, 5 million families will get a child tax credit of ??442 a year. Pensioners will see their pension rise by ??5 for single pensioners and ??8 for couples.
We have built the foundations for full employment with the success of the New Deal and our welfare reforms. Today there are one million more jobs and unemployment has fallen significantly in all parts of the country. Youth unemployment is down by over 80%. People who had no reason to get up in the morning can now earn a living. But we had to levy the windfall tax on the privatised utilities to get it.
And because of sound finances we can invest in our public services. Now and in future years. Investment that is desperately needed.
That investment allied to reform has meant the foundations have been laid in education. In the last four years we have shown that school standards can improve, that the 3Rs, the basics can be taught properly in schools. Infant class sizes have fallen sharply. Primary schools results are up dramatically thanks to teachers embracing the literacy and numeracy strategies. The latest Ofsted report shows that more than 8 out of 10 schools are improving their teaching. 17,000 school refurbishment projects have been funded. There are 7,000 more teachers than in 1998. More than 2,000 more teacher trainees than this time last year, raising standards in all schools.
But we had to choose to spend that money.
And the NHS is beginning to turn the corner. The first proper regime of inspection and national standards are in place. Allowing for seasonal variations, both inpatient and outpatient waiting lists are being brought down. The average wait for inpatient treatment is now less than three months, even though still far too many wait too long. There are 16,000 new nurses and nearly 5,000 more doctors. But we still need more. So we are creating the first new medical schools for 25 years and recruiting another 20,000 nurses as part of the NHS Plan. New hospitals too. 33 major hospital developments underway or planned in England alone. 5 already open. Primary Care Groups devolving power to GPs in every community. New inspection of all hospitals to ensure high standards. NHS Direct providing high quality nurse advice around the clock now available across the country. New services and faster treatment for cancer services. But we know we have a lot more to do to produce a first class health service.
But again it only comes through choice.
Crime is down 10% since 1997. Domestic burglary is down 21%. Car crime is down 15%. But violent crime is still rising and is the next big challenge. We have invested in big crime reduction plans throughout the country. ??150m has gone into CCTV in crime hot spots, city centres, car parks. Police numbers have been on a downward trend since 1993. Now as a result of new investment they are rising.
Our new crime fighting fund has provided resources for another 9,000 additional police recruits.
We have laid the foundations of a new constitution. Reforming the Lords - ending the right of hereditary peers to vote. A Scottish Parliament, National Assembly in Wales, an assembly in Northern Ireland, a mayor for London -devolution delivered as promised. Freedom of Information Act to make government less secret. A bill of human rights to protect the vulnerable.
And the foundations of a new relationship with Europe. Protecting our vital interests on tax, border control. Extending our agenda for economic reform. Working with our partners to tackle drugs, asylum, an environmental issues. Strengthening Europe's defence within NATO. Successfully getting the go-ahead for enlargement which will help to secure peace in Europe.
But it is all a choice we, as a nation, have to make.
For I never forget that we were not just elected to run a competent government. Not just to prove that Labour could be trusted with power again, or to solve problems as they arise. Our opponents would love it if we were nothing more than technocrats. But the task of a Labour government is never just to be practical but to pursue ideals. I believe we have laid the foundations for a fairer society which extends opportunity and lifts people out of poverty.
Those are the foundations. But they are only the foundations. Now we have to make the next steps based on new choices.
New challenges: Fresh ambitions built on firm foundations
Our commitment has strengthened not diminished. Though hardened by the setbacks of government, though more realistic about how long it takes to change big institutions, we remain bold in our ambitions for the country.
Ambitious to rise to new challenges like:
How we spread prosperity to all parts of Britain and harness new technology.
How we invest and reform public services so they become dynamic and responsive to the needs of the public.
How we build a welfare state based on work for those who can, security for those who can't.
How we renew our civic society based on opportunity to all, responsibility from all and reform the criminal justice system to make people more secure.
How we strengthen Britain's influence in the world through our modern armed forces, our approach to Europe and our pivotal role in the world.
In the coming weeks in the run up to the Budget and beyond we will set out a new policy agenda - the ways in which we intend to meet these challenges - in speeches and documents. The two major documents will be education and crime. These follow on from the health and transport plans last year and will mean that in the four main public service areas we will have carefully worked-out strategies over the next few years.
- The education plan next week will cover forward education policy and in particular signal an overhaul of the comprehensive system.
- A crime plan published later this month will set out root-and-branch reform of every aspect of the Criminal Justice System.
- A document on industrial policy and the knowledge economy will set out how we will empower people to cope with change and spread prosperity to every region and community in Britain.
- We will outline the further expansion of the NHS, with new ways for the NHS doing routine operations more effectively, and the devolution of power to frontline GPs.
- We will focus on the next great social challenge: adult skills with a separate document outlining proposals for a systematic strategy that is every bit as concerted as the first-term attack on unemployment through the New Deal.
The Budget will then set out the next economic and fiscal steps in our programme of economic change.
Let me just take out one part of this agenda and focus on it. By 2010 I want to achieve a university participation rate of over 50 per cent among under-30-year- olds. At present, whereas nearly three-quarters of the children of professional parents go to university, barely 1 in 6 of children of parents in manual occupations do so. In our first three years we have increased the number of university students by 34,000 full-time equivalents; over the next few years, we aim for over 74,000 more. Next year real-term funding per student will rise for the first time in nearly 15 years.
We now aim to do more. By the next academic year, 50 per cent of students' parents will not pay tuition fees. There will be bursaries of ??2000 offered to 25,000 students from poorer backgrounds and an extra 5 per cent funding for students from less privileged neighbourhoods. We are expanding university summer programmes for sixth-formers from state schools to encourage them to apply for university. We have now agreed with 27 universities a programme whereby in exchange for government funding, from this April they will make a special effort to recruit from state schools. There will be no quotas; no lowering of entry standards. It is a strictly meritocratic programme. But its purpose is to say to pupils even in the toughest inner city schools: your background shouldn't hold you back; if you have the ability, you can get the place. We will also encourage students to stay on at school or college with Education Maintenance Allowances paid to students in areas covering 30 per cent of the country.
In addition, we are going within five years to more than double the number of specialist schools to 1500 - four in ten secondary schools. We will offer schools three new specialisms: engineering, science, business and enterprise. The Business and Enterprise schools will develop strong business and entrepreneurial links and encourage many more pupils into business and industry.
As well as the big policy announcements there will be a range of other programmes.
· To help young people accumulate assets early in life that give them a financial base for the future.
· To give more young people the chance of voluntary community service at home and abroad between school and university.
· To open up access to the best jobs in the civil service and public sector.
· To change Insolvency Law to reduce the stigma of bankruptcy and stimulate entrepreneurship.
· To encourage more people to become self-employed.
· To open more markets to competition, by removing damaging regulation.
· To put the Employment Service on a new footing that lets them help people find new jobs across the country by identifying housing as well as job placement.
· To make a new drive on equal pay, so that women who do the same work and have the same ability as men, get the same chances and pay.
Some of this will take us in new and radical policy directions.
I want to see more not less partnership between public and private sectors in the provision of public services, where it can help change happen quicker, and that includes health care, education and welfare.
After years of intervention centrally, necessary to get the foundations right and basic standards in place, I want power devolved down in our public services, so that the creative energy of our teachers, doctors, nurses, police offices is incentivised and released. They are the social entrepreneurs of the future, as important as any successful businessman or woman.
For the first time in decades, leaving aside areas like pensions and children where we wish to spend more, Government spending on social security is falling in real terms not rising. For 18 years between 1979 and 1997, 42p of every pound of taxpayers money was spent on interest on the national debt and benefit claims. Now it is 17p.
But we still need to do more to promote big changes in welfare policy - before we can claim that everyone who can work, is given the chance and the obligation to work; and there is proper security for those who through age or disability or the responsibilities of care, cannot work.
For all the talk of an enterprise culture, we are still a long way from getting there. We need to reform radically not just the relationship between business and government but how we encourage small businesses and how taxation affects the business environment.
And I do not believe we can carry on with a criminal justice system that is often, despite the hard work of those that operate it, unco-ordinated, ineffective, hopelessly out of date, and that fails to distinguish between how we tackle criminality, including random and highly organised crime that threatens our social order.
There will be no dogma of the past, no ideological barriers, no hangovers from either the post-war Labour settlement or the Thatcherism of the 80s and 90s, that will stop us getting the right answers that meet our ideals and help improve the lives of the vast majority of the British people.
Two themes run through all of this agenda: opportunity and responsibility. Both are about people, their individual development and potential; giving them the chance to develop their potential; insisting on their duty to make the most of the chance they get. And the huge possibility of this agenda is driven forward by one new political reality. Today the economic and the social in politics go together. Human capital is the key to economic advancement in a knowledge economy. Individual responsibility is the key to social order. Both depend on developing the potential of all our people to the full to provide a more mobile society and a more flexible economy.
Opening up economy and society to merit and talent is the true radical second term agenda. In the past the idea of meritocracy has been attacked. But creating a society that is meritocratic is not wrong; it is just insufficient.
It needs to recognise talent in all its forms, not just intelligence. And it needs to be coupled with a platform that recognises the equal worth of all our citizens.
But breaking down the barriers to success and allowing people's innate ability to shine through is an indispensable part of building a decent and prosperous country. It cannot be achieved by the Government standing back and allowing a Darwinian survival of the fittest, and pretending that it is meritocracy. It requires an active government ensuring a fair playing field and investing in our people and in our public services to release the potential of all.
How far we are from a society of true equal opportunity, is a measure of how far a radical New Labour Government has to go. The foundations are laid. The land of opportunity is not yet built. But I am more certain now than in May 1997, it can and it will be.