IN his only interview on a historic day, Tony Blair tells Political Editor Chris Lloyd about his future role, his present feelings and the legacy left by his past

Q - What are your immediate plans for the future?

A - I have accepted the Quartet job - which is the UN, the US, Europe and Russia - to be their representative in the Middle East. It is a huge challenge.

It will take a lot of time, so I am saying now that I am standing down as MP for Sedgefield with immediate effect.

It is one thing to say to the people of Sedgefield that you do not see a lot of me because I'm Prime Minister. It's another thing when I'm in the Middle East. I just don't think it is fair.

I think the constituency would now probably like to get a full-time MP back.

I want to say how much I owe to my constituency, the people of Sedgefield and the people of the North-East, who have been extraordinarily loyal to me and I'm deeply grateful to them.

A lot of what became New Labour started in Sedgefield.

I will not be selling my constituency home (Myrobella in Trimdon). I will announce in the next couple of weeks that it will be a base for a foundation that is focused particularly on young people and sport. I am convinced that both for reasons of health and fitness and creating more responsible citizens that sport has a huge part to play. This is not goodbye to my constituency or the region.

At some point, I also want to start a foundation on interfaith - how you get the faiths together and show people faith is relevant to the world and part of our tradition.

Q - What does the new job as Middle East peace envoy entail?

A - I have to prepare the ground for a negotiated settlement, and the key to that is to prepare the Palestinians for statehood.

There have to be two states - Israel confident in its security and Palestinians with a viable state not merely in terms of its territory, but also in terms of its institutions, its capability - otherwise there won't be a deal.

That's the reality.

Anywhere you go in the world, this is the issue which concerns people, not merely because of the plight of the Israelis and the Palestinians, but also the symbolism of the dispute, what it says about the state of the relationship between the Western world and the Muslim world and between different cultures and religions.

It is a fundamental issue.

I will be starting straight away. I will probably go out in July.

Q - How has your last day been? What did the Queen say when you arrived at Buckingham Palace?

A - I should not break the convention, but it was a very warm and generous greeting on her part and I expressed my thanks to her for having been so good to me over the years. We have always had a very good relationship.

Q - Were you surprised by the standing ovation you received from all sides of the House of Commons at the end of this morning's Prime Minister's Questions?

A - I was shocked, but very pleasantly so. It is very typical of the House of Commons coming together on occasions like that.

Maybe you become a little emotional, when you suddenly realise that these are the last words you are ever going to say not just from the Despatch Box, but in the House of Commons which, after all, is the mother of democracy and the most famous political institution in the world. What do you say at the end?

Q - You appear content to depart. Is that the case?

A - One of the reasons I have been able to make all the changes I have in the Labour Party and also as Prime Minister is that I have always had the attitude that a really big job like this, you do it according to your beliefs and if you leave your job as a result of them, that's fair enough.

Of course, you can go on, but ten years, I think, is enough. I'm talking to you now and thinking that we used to talk before I was even Labour leader and then I think no, it can't be that long ago. Ten years is a long time, but when I stood out on the doorstep (of No 10) today with the children, I remembered May 2, 1997, when I stood there before.

Q - How do you define your political legacy?

A - For the first time in my political lifetime and, indeed, for the first time in the history of the Labour Party, the Conservatives have had to come to terms with us rather than the other way round.

This means you have changed politics in a more fundamental way than simply winning an election.

Firstly, we have taken the welfare and public services settlement of the post-war period and changed it for today's world. I think people will really see these reforms in education and health kick in over the next couple of years.

In the next two or three years when the pensions legislation comes in, the basic state pension will be relinked to earnings and then we will have a series of low-cost vehicles for people to save in. This will be an enduring settlement for 50 years.

The second thing is in terms of the attitude of the country. I just got a very nice letter from Baroness Amos saying I am black and I am the Leader of the House of Lords - a few years ago that would not have happened'.

I think the country is more prepared now to look outwards.

The reason we won the Olympics was unquestionably because we presented a country that was prepared to sell itself on its merits, not on its history.

That is not to say we are ashamed of our history. On the contrary, we are proud of our history, but there's a difference between being proud of your history and living in it.

Q - Iraq will obviously be part of that legacy. How do you feel when the nightly news bulletins are full of more stories of carnage?

A - If we hadn't acted, it wouldn't be on the news.

They have uncovered the mass graves of several hundred thousand people murdered under Saddam Hussein, and there were a million casualties in the Iran/Iraq war.

It wasn't that people weren't dying before, it was that it wasn't on our television screens.

The most powerful thing is that the Iraqis who have been elected to their government will say yes, it is terrible that we have had the carnage of Saddam and now we have the carnage of the terrorists, why should we have to have one or the other? So we can't give in to the people who are trying to stop us getting the country on its feet'.

The most important thing - and I believe this, although a lot of people disagree with me and that's their right - is that this terrorism is rigid.

It is operating in many, many parts of the world and they think we will give up - if we do, they will keep coming after us.

It's coming from a religious fanaticism that is impossible to negotiate with.

We have to get ourselves out of this mindset that somehow it is our fault and if we hadn't done anything then they would be sitting there being lawabiding citizens. That is not correct.

I don't regret removing Saddam. You can argue about all these issues like deba'athification of the army and disbanding it and so on.

The real reason we have got a problem in Iraq is that the enemy we face is fighting us - it is not because someone somewhere ticked the wrong box.

The worst moments are always when I hear about the deaths of our armed forces.

That's not to say that I don't have a great sense of responsibility for the decisionmaking, I do, but I also don't believe that their evil can entertain our respect.

Q - Sedgefield has enjoyed a remarkable ten years as the Prime Minister's constituency. Possibly the highlight was the day you brought George Bush to town

A - The really funny thing that sticks in my mind is when we went for lunch in the Dun Cow and one of the party member's wives was sitting around the table and she said tell us, George, what is all this stuff with the Israelis and the Palestinians?', and he then gives an exposition of American policy.

I thought how absolutely hilarious: here is the President of the United States in the Dun Cow sitting around having a pub lunch, because people would pay millions of dollars for this information'. It was so funny.

Q - You are, presumably, writing a book with these stories in?

A - Cherie (from across the carriage): His life's not finished yet.

Q - What final message do you want to come out of this interview?

A - Sedgefield has had a dramatic impact on my whole political career and it is no exaggeration to say that I would never have become Prime Minister without representing this constituency.

The most important thing is to say thank-you to the people.

* Read Political Editor Chris Lloyd's personal account of Tony Blair from the politician's first tentative days in the North-East here