TONY BLAIR returns from holiday tomorrow in a position he could only have dreamt of in the aftermath of the general election. While Gordon Brown’s position has deteriorated with a series of Treasury U-turns and mistakes since polling day, Blair has rebounded.

After his majority was slashed by 100 seats, few insiders expected anything other than a disappointing start to the third term. Against the odds, however, he has enjoyed the most successful three months of his entire premiership.

This has given the prime minister a freer hand to pursue his own agenda and Downing Street advisers are planning to exploit Blair’s reinvigorated political capital with radical new policies.

But what does Blair still hope to achieve? In health, he is ready to turn to the private sector to increase services for National Health Service patients, particularly in GPs’ surgeries. He wants to see all hospitals enjoy foundation status. The status, which allows hospitals to borrow money and have freedom over their own affairs, is only available to a handful of top-performing hospitals. Extending foundation benefits to all, could well result in fierce opposition from the Treasury and Labour backbenchers.

However one aide said: “Within two years we want all hospitals to get foundation status. Of course, Brown doesn’t like it but what can he do about it? The prime minister has never had Brown more where he wants him than now.”

In education, “Blair has not been nearly so clear about what he has wanted to achieve”, said one Downing Street aide. He continues to rely on Andrew, now Lord, Adonis, a former No 10 policy adviser, in his new role as an education minister, creating tension with Ruth Kelly, the education secretary.

Adonis has been working on a white paper to go before parliament in the autumn. A centrepiece will be the rapid expansion of city academies, privately sponsored and managed schools that have been criticised by some for not improving results, and have caused concern about the influence of wealthy sponsors.

The number will increase from 20 to at least 200 with Whitehall given the powers to force local councils into accepting academies in their areas. New national standards will also be introduced and they will come under the auspices of a new government-funded trust.

One close aide said: “We have had problems with local councils blocking the academies for political reasons. We are now working on new legislation to force their hands. We have sponsors lined up but we want to stop them walking away after experiencing local problems.

“There will also be a new national body to encourage sponsors and provide a standardised model for the academies. In the past, some have been a little bit too creative. We want to keep the flair and the differentiation but remove the risk.”

Most controversial of all, the control of most schools will be steadily removed from local authorities with head teachers given new powers to run schools as they see fit. “Blair believes independent schools provide the best model for education and wants state schools to emulate them. This will be the last major Blairite policy on education and it will herald big changes. All schools will increasingly conform to city academies. Blair has been very impatient at the pace of change.”

Law and order has been a priority since Blair’s “tough on crime, tough on the causes of crime” slogan as shadow home secretary as long ago as 1994. But he remains dissatisfied with the government’s inability to reduce crime across the board and is particularly frustrated with the apparent slowness to act of Charles Clarke, the home secretary.

Downing Street advisers say radical plans are being studied to reform the police, with new performance targets and even league tables under consideration. Blair is said to believe that money is being “thrown away” on the police and he wants to introduce some of the private sector ethos being instilled in NHS hospitals and state schools.

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