No problems with Blair

With Britain's Labour Party in crisis after a poor showing in local elections, Prime Minister Tony Blair faces mounting calls to set a date for leaving office and handing over power to his likely successor, Chancellor of the Exchequer Gordon Brown.

Brown speaks about several issues facing the party and the country.

Many in the Labour Party say Blair should announce a date to leave office. Your response?

We have just had very difficult elections. People want to look at how the Labour Party can best prepare for the future. Tony Blair has said he does not wish to stand at the next election and that he wants to organise a stable and orderly transition. Tony and I, despite what people say, get on extremely well. We talk almost every day - sometimes a few times a day.

Are you satisfied with the way Blair is handling the transition?

You've got term limits in the US. We have no term limits. It's a matter for him and the Labour Party. It's not really a matter for me at all.

It's reported that when you talked about 'renewal' of the Labour Party, you meant 'renewal' without Blair.

No, I didn't. The next stage of the Labour Party's development will be Tony Blair, myself and other people working together. We've been working with each other for more than 20 years. We came into parliament together, worked on the creation of 'New Labour' together and formulated many government policies together. I've been chancellor while he's been prime minister for nine years - and we continue to work together. Any party that has been in power for a long time has got to prove by its actions that it can renew itself while still in power. We've done very well to win three elections. But to win another, we've got to prove that we can face the challenges of the next 10 years.

How would you do that?

Clearly, we have new issues: security and terrorism. I think that the electorate feels more insecure and wants to be sure that their security is being properly taken into account. The challenge of the next 10 years is how an immense industrial economy copes with global competition. Products, from computers to toys, that are sold in Britain are produced in China. If you do not explain to people what's happening, they will resort to protectionism.

So how do you respond?

We've got to respond by having open markets and free trade. We've got to invest in science, technology and creative industries - in the skills of our people.

You don't sound like the socialist you are portrayed to be.

I'm a free trader. I'm pro-open markets. I'm anti-protectionism. I believe that we must have far greater flexibility in the labour markets and in capital markets. I believe that we must combine that flexibility with investment in science and in education. We have got to have a more skilled, more educated, better-trained workforce.

So when people say you represent a return to 'Old Labour', are they wrong?

Totally wrong. And the economy that I admire most is the American economy. There's obviously an interest in my opponents saying that I'm not what I am, but I've worked to create New Labour with Tony Blair, and I've said that what we need to do is broaden the New Labour coalition over the next few years.

If you become prime minister, what will be the main difference between you and Blair?

It's not so much that the method will be so different as the challenges. Many manufacturing jobs were lost in America and Europe last year. People are worried about what's going to happen to their jobs. There's a lot of offshoring and outsourcing taking place. There's a lot more mobility of labour and of people. Unless we explain what's happening, people will resort to protectionism and xenophobia.

How would you position Great Britain between America and Europe?

We're obviously geographically, historically and economically part of Europe. I think what we're doing with Tony's leadership is making European economies more flexible and enterprising and dynamic.

But wasn't it you who stopped Blair from adopting the euro?

We as a government decided not to join the euro.

But wouldn't you say Blair has more of a passion for Europe than you do?

We both came to the conclusion that while [the euro was] desirable in principle, in practice, economically, it wasn't the right thing to do. And I think that has been proven to be the right decision because our economy is more geared towards financial services and business services than some other economies.

What do you think of the war in Iraq?

I was a supporter of the war in Iraq.

But what do you think your country and the US should do now?

We are hoping, as is the president, that the work we are doing to create a new government and to have local people managing the police and security [will succeed]. But it has been my interest to see the economy of the country develop, which will provide a far more secure environment. I'd be interested to train the local security and police forces to build a stronger democracy and government and to provide the basis on which economic development can bring the communities together.

What do you feel about Iran?

It's in nobody's interest that we have these threats from the development of nuclear weapons, and therefore I think we'll find that Britain is working very closely with America, France and Germany to make sure that we have a diplomatic solution to this.