Gordon Brown: Britain is on track

In a warning against inflation-busting wage demands by union leaders, Mr Brown said that he would not yield to "short term fixes or soft options".

The speech to the TUC in Brighton, which received brief applause from delegates, comes at what is seen by many as a key moment in the government's relationship with the trade union movement.

We will not yield to any inflationary pressures, any unaffordable demands or any short term quick fixes or soft options Gordon Brown Analysis: Brown leaves the brothers unmoved

At a private dinner with the TUC's governing council, Prime Minister Tony Blair insisted his government would not be shifting to the left.

Mr Blair said: "The idea of a left-wing Labour government as the alternative to a moderate and progressive one is the abiding delusion of 100 years of our party.

"Sensible trade unions - and most Labour Party members - know this government is doing its best for working people."

Mr Brown said in his speech that Britain was on track for stronger growth with low inflation, despite continuing global difficulties.

"And we will not yield to any inflationary pressures, any unaffordable demands or any short term quick fixes or soft options that would risk or squander the huge economic opportunities that our new won and hard won stability offers the British people."

Mr Brown contrasted the UK's economic performance with that of many of its trading partners.

He then went on to outline what sees as some of the government's successes including extra nurses and teachers.

But he insisted that where there was investment there must be reform, that both efficiency and value for money was expected.

He said Labour must not forget the lesson learned from its successes and failures over the last 100 years - that "the foundation of all we do...is our ability to secure economic stability and progress; to make possible rising employment, to create economic prosperity."

A strong economy would allow the government to reach its goal of full employment and build prosperity "not for some but for all", he said.

Criticism

Mr Brown's appearance at congress follows criticism of the government from many of its traditional union allies.

There was a more subdued tone about the economic outlook, in contrast to the triumphalism and optimism at the time of the last Budget Analysis: Return of the Iron Chancellor

Speaking after the address, Unison boss Dave Prentis said that the chancellor had repeated a lot of achievements that his audience already knew about but failed to "address the differences between us".

"I am not saying that it was a bad speech because it touched all the buttons but he did it in a way that was safe and I think he was more conscious of not rubbing anyone up the wrong way and giving any commitments that could be perceived by the CBI or the media as moving towards a union position."

Mr Prentis noted that Mr Brown did not mention either foundation hospitals - due to be debated by the TUC on Wednesday.

Dinner with unions

Public and Commercial Services Union boss Mark Serwotka described the speech as a "missed opportunity" as the "privatisation, pro-business agenda ploughs on".

And Conservative shadow chancellor Michael Howard said public sector pay had risen much faster than pay in private companies, despite Mr Brown's tough words.

On Monday, Tony Woodley, of the Transport and General Workers' Union, told a fringe meeting that Prime Minister Tony Blair should resign over the Iraq war.

Despite facing criticism too for "imposing" public service reforms, the government won praise from unions for boosting investment in health and education.

Before Mr Brown's speech the head of the CBI, Digby Jones, struck a conciliatory note when he appeared in a debate with Trade Secretary Patricia Hewitt and Mr Barber.

He acknowledged that business leaders did not always get it right but that they did more than they were given credit for with regard to workplace relations

His conciliatory message continued as he said business and unions had common cause over issues such as the 3.5 million people who go to work each day, who are illiterate.