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Last Updated: Friday, 6 May, 2005, 11:09 GMT 12:09 UK
What's in the new PM's in-tray?
By Steve Schifferes
BBC News website reporter

Tony Blair at No 10
Tony Blair will face a full in-tray when he returns to his desk at No 10 Downing Street on Friday morning.

Some key decisions which have been postponed because of the election will now have to be faced, with key reports on council tax and pensions due soon.

And the process of deciding Labour's future spending plans will begin in earnest, with a slowdown in the growth of the public sector on the cards.

On Friday morning, Tony Blair outlined five key domestic priorities for the next Parliament: reform of the public services like health and education; further welfare reform to get more people back into work; pension reform; improvements to the immigration system; and tackling "disrespect" in the classroom and the community.

But his reduced majority means he may face difficulty from within his own party on many controversial issues.


The first few months of his third term, however, could well be dominated by foreign policy issues.

Britain is hosting the G8 Summit of world leaders in Glenagles, Scotland, at the beginning of July, and is planning to use the occasion to push for further movement on climate change and increased aid to tackle poverty in Africa - both issues on which the Prime Minister will face resistance from his close ally, President Bush.

Turner Commission, Nov 2005
Lyons Report, Dec 2005
Treasury, July 2006
Defra, first half of 2005
DoT feasibility study, 2004 NUCLEAR ENERGY
possible White Paper, 2006 NUCLEAR WEAPONS
by 2010

And Britain will also assume the presidency of the European Union on 1 July, taking the lead on key negotiations for six months.

Among the most sensitive issues could well be the future of the European Constitution, unless the French reject it in their referendum on 29 May, which could throw the whole EU into crisis (with Britain in charge of sorting it out).

The government has pledged to call a UK referendum and ask the British public to support it whatever the outcome of the French referendum.

Given the widespread public scepticism about the EU constitution, if the government wants to win that referendum, which is widely expected to take place in the spring of 2006, the campaign would have to begin soon.

And finally, the issue of Iran's nuclear weapons could come to a head sooner rather than later, within Britain a key member of the group of EU countries that is trying to persuade Iran to abandon nuclear reprocessing.

Britain has also promised to take a leading role in trying to reach a peace deal between Israel and the Palestinians.


On the domestic front, Mr Blair's government is likely to seek to introduce one of its most controversial measures on law and order - ID cards.

Armed police on terror alert
The terrorist threat has prompted new approaches

The bill received its second reading in the last Parliament - with the Conservatives abstaining, and the Lib Dems opposed, along with 19 Labour backbenchers - but had to be abandoned when the election was called.

The Labour government believes it is crucial to the fight against terrorism, people smuggling and illegal immigration, and crime.

Critics say it will reduce civil liberties while being ineffective against determined criminals and people smugglers.

The civil liberties group Liberty says if Labour re-introduces its plans for ID cards, it will be its top campaigning priority.


But perhaps the biggest decision facing the government will be how much to spend on public services in the next term.

This will be affected by the state of the economy and the public finances.

Many commentators, including the international organisations the IMF and the OECD, believe that the government is being over-optimistic about the amount of tax revenue that it is likely to receive in the next few years.

Health: 6.9%
Education: 5.7%
Transport: 4.5%
Crime: 2.7%
Defence 1.4%
% annual average real growth
Source: HM Treasury

And many economists believe that the UK economy is showing signs of a slowdown and may not achieve the 3-3.5% growth rate expected by the government (the average of independent forecasts in 2.5%).

The government is projecting that tax receipts will rise of their own accord by 2% of GDP, or 20bn, over the next two years, ensuring that it meets it own fiscal rules over the next economic cycle that will begin in 2006.

But if it doesn't, then the government will have to consider either tax increases or spending cuts in the April 2006 budget- although it has ruled out increases in the basic or higher rate of income tax.

The budget gap is notoriously difficult to forecast, and the chancellor might be lucky in his tax receipts - especially if oil prices stay high, boosting corporation tax.

But the uncertainty over meeting the public spending rules will increase pressure on the next public spending round which will be announced shortly after the 2006 budget (which will set spending targets for the following three years to 2009).

The bids from government departments, and the battle over spending, will begin immediately after the election.

According to the Institute for Fiscal Studies, the government's already-published plans, which cover the years to 2008, show that the rate of growth of government spending has slowed to 2.5% annually compared to a 4.2% growth rate in the second term - and could slow further as the pledged increase in health spending ( more than 7% per year) comes to an end within this period.


The coming squeeze on public spending will increase pressure to speed up reform of the public services.

As he returned to Downing St, Mr Blair said that "reform and change" in the public services to "make the change necessary for the 21st century" was his top priority.

Labour wants more choice for pupils and parents

In his second term, conflict between Mr Blair's robust approach to public sector reform - which involved the use of the private sector to provide publicly funded services, and increased competition between public sector providers - often ran into conflict with the Chancellor, Gordon Brown (for example, over foundation hospitals).

This term, Mr Blair wants to reduce the emphasis on targets, which he admits sometimes have a distorting effect, and place more emphasis on increasing choice for both patients and parents as a way of driving through change.

The government has already pledged that patients will have a choice of any hospital by 2008, and is planning to expand independent City Academies as alternatives to failing secondary schools.

And Mr Blair said on 2 May during the last week of the campaign: "We need to go further and faster in the diversity of supply agenda - it will be a priority after the election."

One change already agreed will double the use of the private sector to provide NHS services like diagnosis and minor operations to around 15% of the total.

Gordon Brown has cautiously endorsed this agenda, speaking at launch of Labour's manifesto of "an empowering, not a dependency creating welfare state. Not monolithic, top down or impersonal but personal to all. Health and education tailored to individual needs. Rights matched by responsibilities."

But some Labour backbenchers, the public sector unions, and possibly the chancellor himself, may feel uneasy by the pace of change and the increasing use of the private sector to provide public services.

And experts like Simon Burgess of Bristol University warn that to provide real choice, programmes will have to be carefully designed and add real resources.

Otherwise there could be more choice for some, and reduced opportunities for others.


Labour has a more general aim of extending social opportunity for all, and in particular tackling child and pensioner poverty.

But it also wants to complete its programme of welfare reform - to get more groups of people, from lone parents to those on invalidity benefit - to move from welfare to work.

Elderly woman with grandchild
Labour has boosted the incomes of young and old to tackle poverty

In its manifesto, Labour pledged to reduce child poverty by half - or another 1 million children - by 2010 and eliminate it in a generation.

This could prove expensive unless many more lone parent families could be persuaded to join the workforce, raising the proportion in the workforce to 70%, as compared to 55% today, according to Professor John Hills, a leading poverty expert at the London School of Economics.

This would have to involve a significant expansion of childcare. Labour has pledged another million childcare places over the next Parliament. All these pledges could be expensive, according to Robert Chote, director of the Institute for Fiscal Studies. He suggests that if Labour is serious about meeting them, then the size of the public sector might have to rise above the 40% projected on current government plans.

And the tough approach to welfare reform, which is also strongly backed by Gordon Brown, could face opposition from the Labour backbenches.


One of the biggest - and potentially most expensive - issue for the government is sorting out the pensions crisis.

The interim report of the Turner commission showed there was a huge pensions shortfall, and highlighted the need for more spending on state pensions and more savings by individuals.

Its final report, expected in November, could well recommend compulsory savings and an extension of the retirement age to 70.

Ed Balls, the advisor to the chancellor who is now an MP, said during the election campaign that any major decision on pension reform would need to be agreed across all the parties, and then put to the electorate in the next election.

However, it is not clear whether this means that Labour would postpone all pension decisions until then - which would dismay many pension experts - or proceed to introduce legislation while seeking that all-party consensus.


Another big issue that Labour has postponed until after the election is the reform of the council tax system.

Council taxes have risen sharply under Labour, and Gordon Brown was forced in the Budget to agree a temporary, one-off 200 rebate for pensioners to reduce their council tax payments.

Labour's own internal review of council finance last summer suggested that business rates might have to rise and argued the case for a partial local income tax - something that has attracted derision when put forward by the Liberal Democrats in the election.

The Lyons Inquiry, reporting in December, will make recommendations on whether councils should be given more revenue-raising powers than the 25% they currently control (the rest comes from central government grants and business rates).

And the government will also have to decide whether to go ahead with the property revaluation in England, which the Conservatives promised to scrap, which could lead to higher council tax bills on properties in the South and West.


Among the biggest issues confronting the next government will be the need to decide whether to replace Britain's ageing power stations and whether to begin planning a replacement for Britain's independent nuclear deterrent.

Both decisions require a very long lead time - probably 10 years - and so any decisions will have far-reaching implications for the future of Britain's role in the world and the future of climate change.

Dungeness Nuclear Power Station in Kent
Dungeness B will shut in 2008

Britain is falling short of its Kyoto targets on reducing CO2 emissions, and that could get worse as more nuclear power stations (which supply 25% of the UK's electricity) come off-stream in the next decade.

The government's chief scientist, David King, is believed to have argued that nuclear power - which has no emissions -might hold the key to the long-term control of climate change.

But that would be fiercely opposed by environmental groups, and even Tony Blair says it would require public agreement that the risks of nuclear waste have been dealt with.


Labour criticised the Conservative approach to immigration and asylum, saying that the British people were "tolerant and decent."

But with this issue running strongly in the Conservative direction, it did promise to improve the immigration and asylum system, including tightening security at the borders and introducing a points system for people wanting to move to the UK for work reasons.

And Mr Blair said that tackling "disrespect" among pupils in the classroom and young people in town centres would be a top priority.

There is already legislation in the pipeline to extend the powers of certain community organisations to apply for Anti-Social Behaviour Orders, and this may now be extended further.


Finally, there is the big question of constitutional reform.

According to the BBC Parliamentary correspondent Sean Curran, Labour has made some of the biggest changes in the UK constitution in 400 years, extending devolution to Scotland, Wales and Northern Ireland and abolishing most hereditary peers in the House of Lords.

Now it needs to complete that reform, addressing the question of whether elected peers should sit in the Lords or just peers appointed by the government.

Labour has also pledged to look at giving more powers to the Welsh Assembly through a referendum. It currently has fewer powers than the Scottish Parliament.

Given the big difference between the proportion of votes and seats in the election, there could be revived calls for Parliament to look again at the question of reform of the voting system - five years after the Jenkins commission report on proportional representation was effectively shelved by the government.



What lies ahead for Blair and Britain