The Week in Politics: Blair's little olive branch. Will it be big enough for the party?

When Tony Blair makes his tenth, and most important leader's speech, to Labour's annual conference next Tuesday, he will deliver a familiar "no retreat" message for the public's consumption. But his message to his own party will be a little softer; he knows that he needs to work harder to persuade it to join him on his endless "reform" crusade.

Whether his small olive branch will prove big enough to bridge the divide between the leader and his party is doubtful. Mr Blair will promise to listen to his critics, but will also challenge his party to be mature enough to stick with him through hard times, or risk the internal divisions that hastened the defeats suffered by previous Labour governments.

The gulf between the Prime Minister and his party has widened since his "we're best when at our boldest" speech a year ago. The Iraq war, the failure to find weapons of mass destruction and the huge problems on the ground in Iraq have not only lost Mr Blair a year on the domestic front; they have lost him the support and trust of many of his MPs and grassroots members.

The mood in Bournemouth may be sullen rather than angry. Much of the party's lifeblood has been drained, although the conference may spring to life to inflict embarrassing defeats on the leadership over foundation hospitals and Iraq.

The Prime Minister's message on Iraq will be that only he could take the crucial decision; while acknowledging that many people disagreed with it, he will insist he did the right thing. In the long run, I believe, the rebuilding process in the party will matter more to him than rebuilding Iraq. He may be a presidential figure but, in the British system, the leader needs a party. Already there are fears that many members will refuse to knock on doors in next June's European and local elections. Some will vote Liberal Democrat or Green, knowing the Government will not change. At the next general election, people who voted Labour in 1997 and 2001 may not vote at all. So the battle to win them back needs to start in Bournemouth this week.

Blair advisers insist he has got the message. Yes, they are worried about drift and the loss of momentum; they are desperate to return to the domestic agenda. But they plead for a sense of perspective. If this is the nadir, then neck and neck with the Tories in the opinion polls is pretty damn good. A third term beckons, helped by the Tories' weakness and possibly by the Liberal Democrats, who had a successful Brighton conference this week and are more likely to harm the Tories than Labour.

This week the Blairites will ask people to look at the alternatives. On the right, Iain Duncan Smith. On the left, the empty rhetoric and electoral cul-de-sac of Old Labour or Gordon Brown, who sees no need to rush into another round of "reforms" but is telling cabinet colleagues to be "patient" while the money injected into public services boosts capacity. As one Brown ally told me: "If we keep saying the NHS needs more reform, we give the impression it has failed, which is what the Tories want people to think." The Blairites' argument is the well-worn one that "there is no alternative" either on policy or personnel; Mr Blair remains "head and shoulders above the rest", as the former Health Secretary Alan Milburn argued yesterday.

There has been much soul searching among the Blairistas about how to get their "project" back on track. They are advising the Prime Minister to press on with more reform as a means to achieve Labour's traditional goals of social justice and fairness. To stop behaving as if 1994 was "Year Zero". To redistribute opportunity (universities) and choice (health) as well as wealth to make Britain a more equal society.

To reassure the party, we may well hear a bit more of the R-word - redistribution. This Government has redistributed wealth, perhaps more than any previous administration. The small print of Mr Brown's Budget statements shows how his tax credits have significantly raised the incomes of those at the bottom. Yet the Government rarely shouts this from the rooftops. Although the Blair "project" was always meant to be progressive, Blairites still lie awake at night fearing headlines about "tax rises". Yet Mr Brown won the public argument over a rise in national insurance payments for the NHS, so maybe they should relax a little.

More honesty, openness and grown-up debate could be the way to rebuild the trust Mr Blair has lost. In a pamphlet to be published by the Policy Network think tank next week, Peter Mandelson argues that New Labour should return to the "new politics" mooted in the mid-1990s, based on a culture of openness and transparency, this time without "spin" or getting sidetracked into a deal with the Liberal Democrats.

He writes: "The purpose [of New Labour] was not to pitch our tent in some mushy centre ground, but to change the culture of our politics to allow for more rational debate about the big issues facing the country."

It would be good if Mr Blair kickstarts such a debate this week. I shall be counting how many times the "R-word" is uttered in Bournemouth over the next five days.

a.grice@independent.co.uk