Several ministers have given their tacit support to the Labour Renewal Network, which has the backing of about 500 grass-roots party members and aims to allow more debate inside the party.
The group warned yesterday that "the radicalism and ambition of the Government could wane without strong internal pressure".
Organisers deny they are seeking to undermine Mr Blair. "We do not want a factional re-run of the early 1980s," they said in a letter to potential members. They called for "constructively critical engagement" with the leadership by party members who wanted to go "further and faster" than Mr Blair.
The group will oppose Mr Blair's plans to cut taxes further before the general election, and will argue for Gordon Brown's estimated pounds 12bn "war chest" to be channelled into public services.
"There are serious doubts that we are spending enough to create substantial and lasting improvements," said Paul Thompson, one of the group's leaders. "Active intervention means redistribution of opportunity rather than purely alleviating some of the consequences of inequality."
He rejected Mr Blair's warning to his party critics in which he said they could not have the Labour government of their dreams and had to choose between the one they had and a Tory administration.
"You can't scare the electorate with the bogeyman of the current shambles that passes for Her Majesty's Opposition," said Mr Thompson. "Nor can you convince people that their aspirations have to be downsized to fit Labour's own caution."
Downing Street advisers have begun the task of looking for ideas for a Labour second term. But Mr Blair's critics fear the process will be "top down" with little input from the party's grassroots. The group wants a wholesale shake-up of the party's structures to ensure members are given real influence over policy.Reuse content