Blair seems ready to risk the wrath of the 'Sun'

So, Tony Blair and Gordon Brown might go into the next election having already scrapped sterling and with a clear commitment …

So, Tony Blair and Gordon Brown might go into the next election having already scrapped sterling and with a clear commitment to tax the euros in British pockets.

Unlikely? Even a touch fanciful?

Not, surely, after an incredibly short week in the life of this 'New' Labour government.

Last Friday Mr Blair took time out from the war to explain how his bid to construct a new world order required Britain firmly at the heart of Europe.

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True, he didn't change government policy on membership of the single currency, declare it inevitable or confirm the date for a referendum. Indeed, he dealt with the issue in just one short paragraph.

However, the historical discourse on "the tragedy" of Britain's negotiation of all the key European developments since the 1950s left little doubt: Mr Blair does not intend his to be seen as yet another British government which failed to appreciate "the emerging reality of European integration".

Downing Street dismissed as "erroneous" reports that the prime minister planned to hold the referendum on the same day as the next general election.

But there was something compelling about the Sun newspaper's rationalisation that Mr Blair might be tempted by this option because he would not dare to risk the humiliation - and consequent electoral uncertainty - of a referendum defeat in mid-term.

In that event he has been warned: the paper that helped win it for him in 1997, and again in June, will declare itself against Mr Blair and on the side of "a truly independent Britain". It appears Mr Blair is prepared to take the risk.

True again, he has made no commitment from which he cannot escape. But he has joined the debate and made plain his desire. Just as he hears the call of history, so too the prime minister surely knows that his European partners will eventually tire of perpetual promise which, even with his second massive majority in the Commons, he fails to make reality.

Now, just in case we had forgotten about him, the prime-minister-for-the-home-front, otherwise known as Chancellor Gordon Brown, has summoned a second great debate - this time on the question of tax hikes to fund the National Health Service.

Mr Brown stopped short of saying so explicitly in his pre- budget report to MPs on Tuesday.

However, he quoted an interim report commissioned by the Treasury. This made clear the government's view that "the principle of an NHS publicly funded through taxation, available on the basis of clinical need and not ability to pay, remains both the fairest and most efficient system for this country".

Apparently closing the door on New Labour's flirtation with public/private alternatives, the chancellor acknowledged that this would mean devoting "a significantly higher share of national income to the NHS" as he called for a new national consensus to put the health service on a sure footing for the next 20 years.

He can hardly have been surprised by yesterday's headlines: "Doctor Brown's Bitter Tax Pill; Brown points to tax rises in big policy shift; Brown's pledge on the NHS, now for the tax rises."

Nor did he try to run away from them on the BBC's Today programme when he confirmed that neither he nor Mr Blair ruled out putting taxes up.

It was a defining moment - "historic" no less for the Corporation's respected Political Editor as he invited us to recall when last a chancellor had appeared on this or any programme and openly led debate on the virtue of increased taxation.

After all that caution and restraint. After all that first-term discipline, extending even to the embrace of two years of Tory spending limits, Kenneth Clarke subsequently admitted he wouldn't have observed had the Major government been returned to power.

Having established its reputation for prudence, the Blair government clearly calculates the country has changed and that Middle Britain not only wants vastly improved public services but is prepared to pay - and pay heavily - for them.

After all that talk, too, about the Third Way. Forget the 'New' in New Labour. This for all the world looks like a return to the old politics of Left and Right.

Barely six months into Labour's second term the chancellor has audaciously set his sights firmly on the third, and carried the challenge to a weak, confused and demoralised Tory Party.

Labour does not intend to allow Mr Duncan Smith time to prove himself up to it.