Pragmatic pair pull a bumpy deal out of the fire

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Tony Blair and Gordon Brown are pragmatists at heart. For years, the prime minister and chancellor have been consumed by their disagreement over the timing of Mr Blair?s departure from Number 10. But terrible though this feud has been, it has never pushed them into a fundamental break on a central issue of public policy.

That pragmatism was on display three years ago when the two men agreed the terms on which Britain would stay out of the euro. On Thursday, the division between them, this time over the future of pensions, resulted in the same denouement. Once again, the two men reached a settlement on the biggest issue Labour will tackle in this parliament.

Nobody would deny that the journey towards yesterday?s Pensions White Paper has been difficult. Back in November, when Lord Turner?s reform proposals were published, the immediate reactions of the prime minister and chancellor set them on a collision course.

Mr Blair, seeking to embed his legacy before he quits Downing Street, welcomed Turner warmly and sought the most generous deal possible for future generations of pensioner. Mr Brown, anxious over what the nature of his inheritance would be when he entered Number 10, thundered that the Turner package was not remotely affordable.

But it is peace in our time again. As with the euro, the two men hammered out a deal in a series of lengthy meetings in Mr Blair?s Downing Street ?den?, with no other minister or official in the room. ?It has been bumpy and bloody all the way,? says one distant observer of the negotiations. ?There has been a lot of shouting. But they have both come out alive.?

As with the euro decision, allies of Mr Blair and Mr Brown now seek to squeeze a last drop of political advantage from the compromise, claiming that their man won and the other one lost.

Some Blairites argue that when the Turner report was published, the chancellor was opposed, as a matter of principle, to any notion of linking the state pension to earnings. They now gloat that Mr Brown was forced to back down, in part because his argument was out of step with the desire of most Labour MPs to see the state pension increased.

Mr Brown?s allies reject this. They say the chancellor was never against the idea of indexing the state pension to earnings in principle. However, Mr Brown was against the notion ? generated, they argue, by the Turner report ? that the uprating of state pensions was some kind of cost-free exercise, a free lunch for the taxpayer.

There is still one big unresolved issue that will stay at the forefront of the political debate. It is whether the uprating of the state pension will begin in 2012, as the Blairites insist, or whether the chancellor has retained the discretion to begin it as late as 2014 or 2015. But here, the big political decisions are still some way off.

What we can say is that yesterday?s white paper ended a remarkable few days for Mr Blair. In the aftermath of the local elections, the prime minister was badly weakened. But this week, slabs of his legacy have suddenly slotted into place. The pensions settlement has been unveiled. His cherished education bill has passed its critical Commons stages. The decision on nuclear power has been taken. In Iraq, the formation of a national unity government paved the way for the start of UK troop withdrawal in the second half of this year.

Some prime ministers might consider this a perfect moment to leave the stage. But not Mr Blair. He is preparing the agenda for the next parliamentary session, to include reforms of the criminal justice system and the health service. And this, in turn, will fuel the age-old tensions with Mr Brown about when the handover happens. For these men, saving the pensions system is one thing. Agreeing a deal on departure dates is quite another.

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