Alan Milburn, the Blairite former cabinet minister, has warned that Labour must produce new policies to avoid being on the defensive at the next general election about its record on public services.
Writing in The Independent today, Mr Milburn calls for tenants who become "antisocial" neighbours to lose their housing benefit and for similar sanctions to be applied to other state handouts.
In a challenge to Gordon Brown, who is seen as a "consolidator" in a cabinet divided over whether to launch a new wave of reforms, Mr Milburn calls for "independence" to be given to all schools and hospitals, likening the move to the Chancellor's granting of independence to the Bank of England. He wants every school to become a specialist one, and every hospital trust to win foundation status within three to five years.
Mr Milburn, who resigned as Health Secretary in June, has been asked by Tony Blair to produce ideas for Labour's election manifesto.
His article warns the Prime Minister that there are limits to his strategy of "triangulation" - splitting the difference between left and right. He says New Labour will be seen as "soulless and without purpose" unless it delivers the party's traditional goal of social justice.
He warnsagainst "lazy complacency" about the Tories' woes, saying that Labour needs to match the new policies unveiled by the Conservatives and Liberal Democrats at their recent conferences.
Mr Milburn said yesterday: "The worst position we could be in during the run-up to the general election is for the debate to be about whether Labour has delivered or not. The Conservatives and Liberal Democrats are setting out a future agenda and we must do the same."
His comments reflect fears among ministers that Labour will suffer from an "incumbency factor" at the election as voters become impatient about progress in improving education, health and transport.
Mr Milburn said the way to combat the "incumbency problem" was through "insurgency and permanent revolution." He added: "I believe delivery has been good. But there will always be things people will pick away at. We want the election to be as much about what we would do in the future, not just about whether we have delivered. We want to be on the front foot, not the back one."
He warned that there is a danger that New Labour will sound like a "tired old record" unless it shows people what it believes in. "It is the time not just to be bold, but to be bold for a purpose, and that purpose must be social justice," he said.
"We must speed up New Labour, driving harder and faster. But that means we must also be clearer about the direction of travel and the point of destination. That is the crucial thing for Tony Blair now."
Mr Milburn and Stephen Byers, another Blairite former minister, will work together on ideas for the Labour manifesto. They have become licensed critics of the New Labour project.
Writing in The New Statesman magazine, Mr Byers called for a shift to the left and warned that the Government was suffering from "drift" and that its problems went deeper than the "transitional troubles" of the Hutton inquiry and the Iraq war.
Mr Byers said the Government "needs to recognise that a constant stream of useful but relatively minor initiatives are no substitute for a well thought-out programme that is deeply rooted in Labour's values and principles."