Jerusalem is buzzing with activity. There is anxious speculation about the status of the joint Israeli-Palestinian declaration intended to be the centrepiece of next week's meeting in Annapolis, Maryland. Israel has announced a settlement freeze, the Palestinians are deploying troops in Nablus. With the invitations now finally issued, eyes are on who will attend - and at what level. Visiting dignitaries are doing the rounds, keen to avoid failure by showing their support. The Israeli-Palestinian peace circus is back in town.

Ordinary Israelis and Palestinians want peace. Two thirds of Israelis think that a deal is important; even 38% of Hamas voters want peace. But they lack confidence that Annapolis will do much to change the situation. Both peoples are suspicious of each other's intentions and their ability to deliver on commitments. For Israelis, Palestinian resolve to reach agreement and implement key decisions is questionable; and Palestinians wonder whether Israel is genuine about making necessary compromises. On the ground, words and deeds are often dangerously out of sync, and a lack of public support could prove to be a real barrier for the leaders.

So it's on the ground that changes have to happen. In drawn-out conflicts, people's concerns tend to focus on the hardships closest to home. From Rochdale to Kashmir, I've found that talking to housewives is the best barometer of where the real concerns lie. Palestinians worry more about their economic situation and personal security than they do about the peace process. Israelis are desperate just to feel safe. What is sometimes missing is the realisation that they are dependent on each other for these things, and that they themselves gain by improving daily life for the other side.

Both sides need to fight their natural instincts to weaken the other. In the past, the "roadmap" was used as a tool of mutual recrimination, not to build mutual confidence. More Palestinians need to remember they have something to gain from ensuring Israeli security, and more Israelis need to remember it is in their interests to ensure Palestinian livelihoods. And however important it is that third parties lend their support to the peace process, they cannot manufacture this vital sense of mutual trust.

That's why Monday's announcement by Tony Blair was so critical. It's true the steps he announced were modest. Improving the sewers in Beit Lahiya or developing faith-based tourism in Bethlehem won't provide a great deal of the much-needed mass employment for Palestinians. Nor will they help improve the access and movement restrictions that are so hampering the Palestinian economy. Nor do they bring any real dividend for Israelis. They cannot replace urgent calls for building Palestinian capacity and institutions of governance. Blair's projects are hemmed in by the need to protect Israeli security, and they are no substitute for a final political deal between the Palestinians and Israelis.

But by doing something to improve daily life for Palestinians, Blair is reminding us that once Annapolis is over, Israelis and Palestinians will still be living the realities of conflict. It is they who will determine the eventual success of the peace process. And it is they who have to begin to feel the change. Examples of Palestinian success, however limited they may be to start with - and they are pitifully limited - are an important step in encouraging Israelis to see their neighbours as viable partners. That kind of confidence will be critical for Israelis to back the painful concessions they need to make for a secure and sustainable peace. It's in the small changes on the ground that the success or failure of Annapolis will eventually be measured.