William Keegan, Observer

Anyone who attended the 1984 Conservative Party conference in Brighton approaches that town with caution. One understands why they take such precautions with security. Even so, as I was quizzed about the Swiss army knife I use for sharpening pencils ('you will keep this about your person at all times, won't you, sir?'), I couldn't help thinking that this was unnecessary on two counts. For one, the Government is now talking to the IRA, and second, the terrible 1984 bomb was planted well before conference-goers arrived.
It was a commonplace last week that the security seemed even tighter than under the Tories. New Labour, extra caution, as the title of a new book on Tony Blair's government reminds us, Safety First - The Making of New Labour.*

New Labour is not only cautious; it is sensitive to the market. As a late applicant for a pass, I was told I should have to pay a penalty of pounds 35 and wait at least half an hour. 'Do I have to pay now, or when I collect the pass?' 'When you collect.' Happily, the system broke down, and I neither volunteered, nor was asked for, the pounds 35. New Labour is still coming to terms with greed and the market.

It was a funny old conference. (I judge on the basis of a two-day sample: I have long believed that attendance at the whole of a conference should be accompanied by a Government health and sanity warning).

This was the conference at which Labour finally came to terms with the fact that it had won the election. It was a celebration, but New Labour triumphalism was held in check by the prominence of figures such as Ken Livingstone and Diane Abbott, and by the way Peter Mandelson was shown to the waiting room.

There were even signs of a healing process. Having been put in their place by a succession of moves by Blair, Neil Kinnock and John Smith, the trade unions and the left are grateful for small mercies. Gordon Brown, whose caution was born of terror of losing the election and extinguishing the party, has by no means relaxed his guard; but he did feel able to send more reassuring signals to the people, party members and others, who voted for something a little more ambitious than New Labour's formal position – or 'project', as they like to call it.

'This country's government - for 18 long years a force of reaction and division – is now, and will be, a force for social justice and progress . . . From now on, fairness and justice will be the rock on which taxation policy in Britain will be built . . . We are now renationalising (my italics) our National Health Service . . . (The cut in VAT on fuel) is only the first step in securing justice for pensioners . . . Let the minimum wage be a permanent memorial to the life and work of John Smith . . . High and sustainable levels of growth and employment, the aims of the 1945 government, reaffirmed in 1997 . . . these are our values. Socialist values.'

New Labour speeches have a low verb count. Whether this affects fertility remains to be seen. But there have been clues in many a Brown speech, echoed last week, that for all the criticism he has had to bear in 'modernising' the party, he has not forgotten his roots. The same can certainly be said for Robin Cook and John Prescott. Which brings us, via the organ music, to the leader.

Although the nationalism was cloying and not entirely consistent with the European aspirations, Blair delivered the right speech for the audience and the occasion. The most hardened left-wingers I talked to afterwards were embarrassingly generous with their praise. The Cynical Tendency had an afternoon off; I overheard a colleague ask the person he assumed to be the speechwriter 'where did you get that Milton quote', to which the answer was 'from Milton'.

Blair is good at telling an audience what it wants to hear, and this was not an occasion for acknowledging his debt to Thatcherism, nor for praising that person against whom most of his party fought for more than a decade. It was noteworthy that the Prime Minister's acknowledgement of his debt to Kinnock won prolonged applause, as did his commitment to multi-racialism.

The book that seems to have influenced him most is The Strange Death of Liberal England. His speech implied that his main 'project' (ugh!) is to mend the almost century-long split between Labour and the Liberals. Keynes and Beveridge got their mentions; so they should: those great Liberals inspired the economic and social policies New Labour abandons at its, and our, peril. Modification and up-dating yes; dismantlement, no.

Labour's caution is seen in the way Brown referred last week to 'the mistake of 1964, when our government failed to take the tough, long-term decisions for change early on' and 'the mistake of 1974, spending hopefully for the first two years . . . and then having to cut back miserably in the next three'. Evidently he has only to mention the albeit vague goal of 'full employment for the twenty-first century' for his Downing Street neighbour's spin doctors (the Chinese call them 'propaganda tzars') to start muttering to the Financial Times. This despite the fact that the Chancellor spends most of his time expatiating about 'employability' - equipping people for new jobs rather than preserving old ones.

The Prime Minister - 'Mr 93 per cent' according to the latest polls - knows he has nowhere to go but down. The crisis in hospitals and schools cannot be waved away by populist and nationalist sentiments. 'Compassion with a hard edge' is a contradiction in terms, as Anthony Howard told Newsnight. 'Hard choices' are going to be made by the people, not the People's Party.

The fact is that, by eschewing increases in income tax, our Prime Minister has himself taken the soft choice. He preaches 'giving'. He will be judged by whether he has given in to Thatcherism.

• by Paul Anderson and Nyta Mann, published by Granta, at £9.99.