Labour's hunt for a fresh sense of purpose masks confusion and torment

Mr Blair and his allies proclaim their boldness without thinking through what it is they are being bold about
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New Labour's leading strategists are in a state of confused torment over the legacy of Margaret Thatcher. They rub their hands with glee at the prospect of Michael Howard being the star turn at tonight's dinner of the Lady's worshippers, the one commemorating the 25th anniversary of her arrival in Downing Street. Look, they say with justified verve, Mr Howard is reminding voters of his Thatcherite past while we will be focusing on public services at the start of our summer election campaign.

Yet the very same strategists are themselves in awe of Mrs Thatcher's past. They kneel at her altar while seeking to knock it away. Having proclaimed her as a vote loser for Mr Howard they cite her as a role model for Tony Blair. In particular they are studying with a neurotic intensity the equivalent period of Mrs Thatcher's premiership, as she looked ahead to a third election campaign. In 1986 she was having a torrid time surfacing from the Westland crisis, slipping on banana skins and lacking a clear sense of direction. She won a landslide election victory a year later.

Their analysis of how she moved from crisis to electoral triumph explains the current simmering internal tensions over Labour's next general election manifesto. By the autumn of 1986, Mrs Thatcher was bursting with fresh and radical ideas that went on to form the basis of her 1987 election manifesto. Mr Blair and his allies seek to re-energise the Labour government in a similar manner.

Ardent Blairites have always been gripped by the rhythms of the Thatcher years. They have been more successful than probably even they realise in shifting the agenda in a more social democratic direction, but Mrs Thatcher's style and oratory continues to cast a spell over them.

In Mr Blair's conference speech in 1997 he declared that the new government faced "hard choices". His aides eagerly described this as a "Margaret Thatcher moment": the Prime Minister was outlining a tough route ahead in which he would stride through the storms. In reality there were no storms at the time as the economy was booming and the Government was 30 points ahead in the polls. Last year Mr Blair declared that he had no reverse gear, echoing Mrs Thatcher's "The Lady's not for turning". Mr Blair's reverse gear has been well used since as it had been before. Now Mr Blair and his close allies are at the 1986 point of the Thatcher sequence. Following her lead they seek to propel Labour to an inspiring third election victory.

This latest outbreak of apparent Blairite boldness is being viewed with some nervous twitching by Gordon Brown and quite a large section of the Cabinet. Mr Brown presided over Labour's landslide in 2001 with a cautious campaign that highlighted a few differences with the Conservatives and the strength of the economy. Next year Mr Brown seeks to do something similar, aided by the arrival of Michael Howard whose articulate and self-confident leadership highlights more vividly the dividing lines between the two parties. His new political friend, Jack Straw, John Prescott and most of the Cabinet, backs this approach. Only David Blunkett and John Reid are seen as firm ministerial allies of the new Blairite crusade.

Like a lot of New Labour disputes this one is in danger of seeming more dramatic than it really is. Tony Blair's close allies, Stephen Byers and Alan Milburn, have proclaimed the need for a more radical approach without explaining in detail what form that might take. The few embryonic themes they have raised, such as the devolution of power to a local level, the expansion of help for under-fives, more financial help for childcare, are an interesting tip toe around some rich themes, but hardly amount to a detailed prescription for an inspiring manifesto. They are being cautious in their hunt for radical ideas.

Even so this is the beginning of a hugely important internal debate. Mr Blair, Mr Byers and Mr Milburn are right to sniff the political air and sense that Labour needs a fresh sense of purpose. The low turnout that greeted the lacklustre 2001 campaign could be lower still next time. The war against Iraq has overshadowed the Government's domestic agenda. As far as the significant improvements in some public services are concerned few voters have noticed or cared to believe what they were witnessing with their own eyes. The next election will not be won triumphantly on the basis of "vote for us because we are slightly more competent than the other lot".

But a genuinely radical manifesto, giving real shape to a third term, demands some deep and detailed thinking. On this front Mr Brown has good cause to be wary. Mr Blair and his closest allies have a tendency to proclaim their boldness without fully thinking through what it is they are being bold about. In a way that continues to be underestimated, ministerial energies have been sapped in this second term by raging disputes over the coherence of policy reforms. For 12 months, between autumn 2002 and last October, much of the Chancellor's time was taken up fighting rearguard actions against policies that lacked clarity.

What would happen if a Foundation Hospital with unconstrained financial freedom went bust? Why was the Government expanding the private sector in health at the very moment when it was seeking to persuade doctors to sign a new contract committing them to the NHS? At the heart of such questions is a broader dispute over choice and equity in public services. No wonder Mr Milburn chose to spend more time with his family than spend his waking hours navigating between Mr Blair and Mr Brown. But the point is that ministerial energies have been wasted because the policy positions were not agreed in advance of the election. To some extent the same applied after the 1997 election. Ministers gave the impression of energetic activity, but much of it was spent reviewing options rather than implementing policies. They seemed busier than they really were.

Assuming Labour wins a third term it would be disastrous for more time to be wasted pioneering policies that were boldly incoherent. This is where Mrs Thatcher's record is worth re-visiting. While it is unquestionably true that the end of her second term and the beginning of her third had a revitalised fizz, the policies that symbolised the new energy were disastrous. Her desire to display a new cutting edge mattered more than the details. Let us not forget that the new policies included the poll tax, a "housing revolution" that involved the building of no new houses and a further wave of privatisations that were implemented poorly, partly because no one had bothered very much with the detail. The second half of the Conservatives' third term was spent attempting to put right the mistakes of the first two years.

After the trauma of the war and the erratic public service reforms, Mr Byers and Mr Milburn are right to press for a radical and daring manifesto. That is the easy bit. They need to consider very carefully the policies to accompany their crusading declaration. Otherwise Labour's third term will make their second seem smooth, coherent and trouble free.