"We have already made considerable progress but much of our time since the election has been devoted to sorting out many of the problems left us and putting in place changes in our public services that inevitably take time to bear fruit.

"We have beaten back inflation; sorted out the massive debt in our public finances; scrapped the divisive internal market in the NHS; reformed student finance to stop the university system collapsing; embarked on a huge programme of constitutional change; begun to repair the enormous damage done to our standing abroad by the isolationism of the Tory years and, as the best possible symbol of that, we have got the beef ban lifted.

"In 1999, as in 1997 and 1998 and in the years ahead, we will continue to focus on the core issues of greatest concern to people - the economy and jobs, schools, hospitals, crime and transport. We are embarked on major reform in all these areas and this is the year when people will really feel the difference.

"We have in place legislation on schools and the NHS that will kick in at the same time as we put £40bn extra investment into them, the largest ever increase in education and health spending. The minimum wage and Working Families Tax Credit coming in from April and October respectively, will hugely increase work incentives for lower income families, make work pay, extend hope and opportunity to those who have been denied it for too long.

"Of course, the economic circumstances will be tougher on jobs and business. That also is inevitable, given both the domestic economic situation we inherited - with inflation and public debt rising dangerously - and the financial crisis that has cut growth forecasts the world over.

"But because of the decisions we took on entering office, we are in better shape to weather any storms and to emerge stronger from them.

Since the election, over 400,000 jobs have been created; vacancies are still high; youth unemployment has fallen dramatically; and long-term interest rates are at their lowest for over 30 years. We are able to face a world economic downturn, with monetary and fiscal policy now able, unlike under the Conservatives, where interest rates remained at 15% for a year, to respond positively.

"Crime is falling and we are, again, putting in place the toughest attack ever on youth offending and strengthening our criminal justice system.

"Welfare reform is proceeding on a bigger scale than anything contemplated for almost half a century. the costs on social failure are falling. Those who say we have gone soft on reform are confusing the fact that we are doing it relatively peacefully with not doing it at all. In fact reforms are huge: in respect of benefit claimants, the New Deal, disabilities, bereavement benefits and pensions, to say nothing of the Child Support Agency and legal aid. It is a very full agenda.

"Already we have delivered the biggest ever increase in child benefit and a minimum income guarantee significantly increasing the incomes of many pensioners. 300,000 people will have been given a new chance through the New Deal by Easter. We will be bringing forward legislation to make work pay for disabled people through the Disabled Persons Tax Credit.

"1999 will also see constitutional change in Scotland and Wales come into effect. The historic first elections to the Scottish Parliament and the National Assembly for Wales provide a way of keeping the UK together while significantly devolving power downwards to the people. It provides the best way between the status quo, which is unjustifiable; and separation which is dangerous. In Northern Ireland we have in the Good Friday Agreement the best chance for peace for a generation and we must seize it.

"Finally on Europe, with the launch of the single currency just days away, the UK is preparing for the Euro which will affect us, in or out. The government's position is clear - the national economic interest will decide the issue. And the positive pro-Europe, pro-reform agenda is one that can both achieve Britain's interests and provide a way forward for a reformed European social model for the future.

"Of course from time to time, the government like any, will suffer knocks, and the media will revel in them. But they come and they go. What stays is the sense of national purpose. What stays is the Manifesto on which the government was elected, a programme for reform and renewal. A programme which, line by line, we are putting in place.