Question: This week's TUC conference is coming at a time of disengagement between the government, the unions and the party's grassroots. How would you characterise in policy terms, the relationship between government and the trade unions?

Sir Bill Morris: We have to look at the relationship currently in the context of a second term Labour government in office. In the first term of office it concentrated on the economic priorities. First we were working within the spending limits which were inherited from the previous administration.

We achieved, some would say, a significant improvement in terms of economic stability. Low inflation, sustained growth, interest rates coming down to parallel other economies in Europe.

We created a trust factor with the electorate and changed the whole regime of government as business-friendly, a government which understands the importance of balancing economic prosperity with social justice.

Moving into the second term there were obviously high expectations. The government decided to switch its priority to focus on the public services and put in place the policies to deliver sustained growth in spending over the economic cycle.

Of course the government is very sensitive about having to raise taxation, the national insurance for example, rightly make the case that investment must be linked to reform. That, naturally, brings about a certain degree of uncertainty among the people who work in the public services.

But for the last six months or so, the government focus has been more external, more international, with Europe, the constitutional debate about Europe, the euro debate here, and, of course, Iraq.

I wouldn't subscribe to the fact that people - the party, the trade unions, the electorate - have got suddenly totally disengaged. I think it's a cyclical mood which we are experiencing here.

But there is no doubt that it is affecting, particularly, the external issues, the trust factor. So there is a lot of remedial work to be done in terms of getting everybody back on side and committed to the significant change which we need.

There is no irreparable damage in my judgement. But the government needs to refocus its domestic agenda.

Question: Given the cyclical nature of the relationship would you say that you are at the low point of the cycle. Can you think of a time when relations between the trade unions and this government, the Blair government, have been any worse?

Sir Bill Morris: Not so much in my own term of office, but there have been bad periods under past Labour governments, in the days of the Denis Healeys and the Michael Foots. In any relationship where there is common heritage, common values, common traditions, the debate is never about the objective - the end game is always about the methodology.

And I think basically this is what the debate is about. Nobody that I have met ever argued that they want bad public services. Everybody wants better public services.

The issue is how best is that delivered? Is it best delivered by having a plurality of service delivery or is it delivered through the sort of accepted conventional stream where the government is the employer, the deliverer and the funder? That's the debate - yes, of course, there is an ideological debate and a balance to be struck.

The fundamental point that I make here is that the objective is not being debated, and the ideology is very common, what really is at stake is the methodology of delivery.

Question: Last week plans for a new public services forum were announced. Given that the prime minister appears unbending on issues such as foundation hospitals and tuition fees in what way do you think you can influence government policy?

Sir Bill Morris: I think that on both those issues you need to look at the starting point.

One of the criticisms that we have about foundation hospitals is that it was never in the manifesto. There was never any consultation, no white paper, no green paper. It sort of just appeared out of the ground.

But you describe the prime minister's attitude as unbending. I think we mustn't hesitate to say that the bill as it currently stands...taking it as it practically stands it is a different political animal than what was first proposed.

At one stage there was huge trade of opinion within government that so-called "co-payment" was a desired objective - where you could top-up on your entitlement. We argued very strongly that universality of care and provision had got to be a hallmark of what this government and this party needs to stand for.

That is just one example where change has been affected. The regulator was never there in the first instance, and I could go on.

I'm not making the case that the idea is the best thing this side of the moon. I'm basically saying that they have responded to some of the representation that has been made.

The fact of that the matter is that politicians do respond to pressure because politics is alive, a reality. I'm not writing off the trade unions' attempt to effect further change through the representation.

That is why we think that the forum for public services is a good idea, because it will expose some of the faultlines in the policy proposals coming forward.

Question: What are the new faultlines?

Sir Bill Morris:I'll give you just one example. The new regulator for foundation hospitals will be accountable to parliament. Well, with the best will in the world, there is a democratic deficit there for me.

I won't be voting for this regulator. I'll be voting for the secretary of state for health. I think it is ministers that should be accountable to parliament, not some faceless bureaucrat with a title of a regulator.

That's just one example where we have got some debates to be had and we hope to make cogent arguments and hope that the government responds.

Because if they don't respond then it seems to be that the quality of the end product will be fundamentally flaw.

Question: In order for the forum not to become a talking shop, do you believe it should be chaired by a senior minister or, perhaps, the prime minister himself?

Sir Bill Morris: I don't care who chairs it. It is not who chairs it that interests me. It's how it sets about its work and how it delivers.

Therefore we will judge it by its results. You can take it that the trade unions and, I speak for my union here although I won't personally be here, if it gets to the point where it becomes a perpetual talking shop, and becomes just window dressing, then frankly the thing will quickly fall into disrepute. People will just walk away from it and the government will be damaged.

Trust would just seep away. And it seems to be it would, in fact, undermine the process and would damage the government - leaving them in a politically worse position. I don't believe that they want that for a minute.

I have no problems about who chairs it. I happen to know the minister who has been given that responsibility and I have every confidence in his ability to deliver constructively.

That doesn't mean saying "yes, yes, yes, yes" but neither does it mean saying "no, no, no" because we are not there necessarily to negotiate. We have got negotiating forums in health, in education, we are there to improve the quality of decision making, to highlight our concerns before legislation is active.

Question: Do you think the creation of the forum and the concessions you have won on recent policy is indicative of the fact that Labour traditionalists and trade unionists are reasserting themselves in the second term?

Sir Bill Morris: I would like to think that it is a response to the merit of arguments and the justice of the case. After all, politics is about pragmatism and in that sense if you put a good argument together then politicians understand the importance of popularity.

And you see we are in the area, the arena which is crucial to electoral success as Labour moves forward to try and gain the third term.

As I keep saying to ministers and others, it's not what is happening outside the borders, when the election comes in 18 months time or, it's not the euro that's going to be the defining issue.

It's going to be voters' experience as to whether they can get on the London underground, how long is the waiting list and whether Little Johnny is in a class of 45. It is the bread and butter issues, the public services.

The Clinton concept was, for his first term, "it's the economy stupid". Well, for us, it's public services. That's what is going to define success or failure. From that point of view, the government and politicians will have an eye as to what is popular and what is the pulse, the feel of the British electorate.

Question: What will you be wanting to hear from Gordon Brown when he addresses the conference this week?

Sir Bill Morris: I think there is, in my judgement anyway, common consensus that he is undoubtedly the most successful chancellor that we have had for generations - certainly Labour chancellors.

He's a class act on the world stage - not just in terms of his management and stewardship of the economy here. I know that it is popular at the moment to try and find little chinks in the armoury of his economic strategy. It is almost as if people are praying that his growth forecast of 2.5 per cent isn't delivered, because people want to say he has failed.

If you track these things, we have actually sustained as a nation 44 quarters of consecutive growth with inflation down to record lows, interest rates are at 3.5 per cent and we have got economic stability. And in terms of employment the economy has expanded.

So it seems to me if that Gordon Brown doesn't say that he is going to bring about revolution this week, no one will say that it is a great disappointment.

What I want Gordon Brown to focus on is to close the gap between the disparity in incomes. There is a gap and it is a gap between those at the top and those at the bottom and it is getting wider. That is an issue.

I also have some issues around the whole regime of benefits being provided as credits - the pensions credit, the child credit, the working families tax credit.

I think there is a clear case for consolidation for some of these credits because the take up is miserably poor, it's bureaucratic and costly. Whilst I can understand that the concept is to incentivise some and stimulate others I am not so sure that tax credits system is necessarily the best way of doing it.

I have some issues with the chancellor about application. I have issues about the minimum wage, I think we are at the point not where we can have a greater sustainability on a decent minimum wage.

So I won't be too disappointed if he doesn't announce a tremendous leap forward in terms of welfare because I don't want to see anything deflect from the committed levels of expenditure on our public services. It's a trade off and I think the balance is just about right at the moment.

Question: For the first time in his premiership Tony Blair no longer appears to be Labour's star turn. If the feeling emerges that he is indeed the government's weakness should the succession debate begin?

Sir Bill Morris: I don't agree at all that the prime minister is no longer the star turn. The fact of the matter is that what you have got there is two intellectual giants; they are, if you like the cream of this crop of politicians.

Whatever side of the ideological divide you come down on, that it universally accepted. And it is not just at home, if you take both of them in their different spheres and stand them side-by-side with politicians in Europe, Asia or in the Americas, there is no doubt about it you have two class acts - one as chancellor, one as prime minister.

I don't accept the view that we have to have a debate about succession because the star of one is waning. I am not in that school of thought at all. There is no vacancy for the keys at Number 10. Both of them are doing a cracking job. Yes, Tony Blair has got some issues around international affairs and Iraq, but politics has its phases but these things comes and these things goes.

Question: Once Tony Blair does decide to go is it inevitable that Gordon Brown will be his successor?

Sir Bill Morris: Nothing is inevitable in politics. I have been around the political periphery too long to talk about inevitability.

We are very fortunate that this generation of Labour politicians there are class acts. There are a lot of people within the senior ranks of the party, given their opportunity would make good leadership.

But the debate is a sterile one, frankly because there are no vacancies, no vacancies at all.

Question: You have been on the union stage for decades, but you are still the only black figure on that stage. What should be done to try and ensure that ethnic minorities are better represented at the top end of the union spectrum?

Sir Bill Morris: It is a fair point and your question is a very relevant one. It is one which certainly has exercised my mind. It is like the picture that I see as I look out my window. It is like building a house, or an office. You do the excavation, you set a very firm foundation and you start building upwards and eventually you get to the top and put the roof on.

That is what I see has been happening within the context of our movement. I think that we have to accelerate the process.

I think that we have to ensure that we make a bigger investment both in terms of education, in terms of public debate, public attitude. I think that that needs to happen in every institution, not just the trade union movement but in government and in our civil service, our judiciary and in our commerce.

I call in aid of my point here Bill Clinton's words when he said, "I want my government to look like America".

Well certainly right, British institutions do not look like Britain or the United Kingdom and the trade union movement is no exception.

And I think we have put down in the trade union movement a very good foundation in the workplaces. Below general secretaries - and the movement isn't about general secretaries because there is only one general secretary per union - the movement is about solid strength at every level.

But the wider we continue to build this house we demonstrate that you can get to the top, you can put the roof on. That will stimulate and motivate others to do so. So I think we still have more work to do, but we are very conscious of it. We have just got to make sure that we take the message out.

Question: What can government to do assist you

Sir Bill Morris: The battle that we have to fight is to make sure that the government doesn't pull back on its commitment.

I believe there is an almost silent conspiracy to jettison the report of Lord Macpherson, who identified institutionalised racism as a factor which inhibits the growth and progress and development of black people taking their rightful place as managers, as leaders. That embarrassed Britain and there are a lot of people who are trying to bury that agenda and there are some of them in government.

I am desperately concerned that the government is not giving a lead on this issue. Every single day you wake up and you hear another announcement from the Home Office, which is attacking, attacking, attacking.

They are pandering to anti-social attitudes out there who are, quite frankly racist and the government believes, in fact, that they can meet the concerns of conservatism by being more draconian and nasty than any government has been. I think they have got it badly wrong on the whole context of race and immigration.

Question: Who in government is trying to "bury" the Macpherson agenda?

Sir Bill Morris: I hold government collectively responsible. They have collective responsibility. We have a Cabinet government, so I hold government responsible. That is one area of policy where I disagree with government.

I heard last week that if you want to become a British citizen you have to study law, you have to take a language. New British citizens will know more about the language, the values, the standards, the structure.

Question: Given what you say, given that the race and immigration agenda appears to be directed by tabloid newspapers and implemented by government, do you fear that we could emerge from this period as a more racist country?

Sir Bill Morris: A more intolerant country in many ways - not just on the issue of race. Issues about social attitudes, a whole raft of ways that could be expressed; the collegiate nature of our society could be damaged by all that.

I worry. That is one aspect of government policy and public pronouncements which causes me deep concern.

Question: Finally you have been involved in the trade union for 40 or more years, what is next for Sir Bill Morris?

Sir Bill Morris: A rocking chair. I keep saying to people when they say, "what will you do when you retire". I say, "retire". But I can't convince anyone that I am actually retiring, but I am.

There are one or two things that I will take into retirement with me. For example, I value my work very much that I do at the Bank of England as a member of the court and non-executive director. I think it is a privilege in terms of public service.

But my most cherished work that I want to develop is my chancellorship in one of the universities out in the Caribbean, in Jamaica. I want to spend a little more time out on campus working with the young people there.

But I am not disappearing from public life. My interest in asylum seekers and refugees will continue. I have tried to give a voice to those who have not got a voice at the moment in our society. And I shall continue to do that.

Indeed I will be able to speak in a much freer way because I won't be constrained by my union's policy, or indeed anybody's policy.

What I have said to my colleagues here is that I may be off the payroll but I will not be going away.