Tony Blair argued that Britain's forces needed to be ready to fight as well as take part in peacekeeping activities yesterday as he called on the public to support the government's determination to eliminate the threat to the country's security.

During a speech to academics and military commanders in Plymouth, the Prime Minister used what amounted to his valedictory address on defence to justify why the British government should not change its foreign policy.

He acknowledged the grief and mayhem caused by the loss of life in the war against terror, but he argued that the struggle, which in all probability would take a generation, was worth the sacrifice.

He said: "To retreat in the face of this threat from the enemy could be a catastrophe. It would strengthen global terrorism; proliferate it; expand its circle of sympathisers.

"Given the nature of it and how its roots developed, long before any of the recent controversies of foreign policy, such retreat would be futile. It would postpone but not prevent the confrontation."

Insisting there were no soft alternatives, he called for a new agreement between the armed forces, the government and the public to ensure the new settlement for the forces would be workable and fair.

"In government, it will mean increased expenditure on equipment, personnel, and the conditions of our armed forces; not in the short run but for the long term. On the part of the military, they need to accept that in a volunteer armed force, conflict and therefore casualty may be part of what they are called upon to face.

"On the part of the public, they need to be prepared for the long as well as the short campaign, to see our participation alongside allies in such conflict not as an atavistic, misguided attempt to recapture past glories, but as a necessary engagement in order for us to protect our security and advance our interests and values in the modern world," he added.

Speaking against a backdrop of complaints about the dire state of military accommodation and a general lack of resources, Mr Blair acknowledged the armed forces were being asked to do much more than anticipated.

But he said that poverty could not be solved simply through aid. "Poverty in Africa can't be solved simply by the presence of aid. It needs the absence of conflict. Terrorism destroys progress. Terrorism can't be defeated by military means alone. But it can't be defeated without it."

William Hague, the Shadow Foreign Secretary, led the opposition to the Prime Minister's defence strategy. Claiming that Mr Blair's legacy would be an overstretched Army, Navy and Air Force, he said: "Soldiers serving on operations want to know what Mr Blair is going to do now about the poor accommodation they and their families have to live in, the withdrawal of allowances that they used to receive whilst on operations and the medical care given to our troops on their return home."

He added: "Our servicemen and women want to know what Tony Blair is going to do about the failure to deliver new armoured vehicles to protect troops from roadside bombs in Iraq. They want to know when they will have enough helicopters in Afghanistan and when the Hercules transport fleet will get proper protection."

Liberal Democrat leader Sir Menzies Campbell said that Mr Blair had failed to learn the lessons of Iraq and Britain must review its relationship with the US.

"We need a partnership of influence not subordination," he said. "Britain has to learn that we will only be at our most effective in tackling terrorism when we operate within the rules and with allies of the same mind."

The chairman of the Commons Defence Select Committee, Tory MP James Arbuthnot, gave the speech an "unreserved welcome" but said Gordon Brown's approval was vital. The Prime Minister is recognising both the strain under which the armed forces are operating and the steps needed to put it right," he said.

"What is essential is that the Chancellor should now, immediately, endorse what the Prime Minister is saying."

Labour left-winger John McDonnell, who is bidding to succeed Mr Blair as party leader, said: "Tony Blair's speech today is the delusional ramblings of a Prime Minister who has used British military forces to allow him to strut the world's stage and has made the most catastrophic foreign policy mistakes since Suez by taking us to war in Iraq and Afghanistan."