Balls accuses Blairites of 'demoralising' party by belittling successes

Ed Balls, the former chief economic adviser to Gordon Brown, accused the Government's Blairite faction last night of "demoralising" the Labour Party by under-selling its achievements in office.

In a thinly veiled swipe at modernisers around the Prime Minister, he complained that its "track record of success" in handling the economy had been taken for granted.

At a fringe meeting organised by The Independent, he said: "Too often in the second term, rather than defining ourselves as a progressive force against the Conservative right wing and extreme opposition we spend too much time seeking to define ourselves against ourselves. The problem with that as a strategy is it ends up leaving the party demoralised because it feels the great things that have been achieved have not been highly valued."

Mr Balls, who sidestepped a question on whether Tony Blair was essential for a third term, said: "We need to be united and give the impression there is no argument and division." During the meeting - Labour's Third Term: Can it be More Radical? - he said: "It is essential we have a cabinet that is united going into our third term."

Stephen Byers, the former cabinet minister, argued that the party had to stand on a "new agenda for redistribution" next year, when it had to display a sense of momentum, combined with a reforming zeal. He warned of the danger that the Blair government could fail to achieve the same lasting social changes as administrations headed by Clement Attlee and Margaret Thatcher.

"My worry is that the improvements we've made could all too easily be undone by an incoming Conservative government," he said. "We need to make changes that are irreversible so that we have a third term that entrenches a progressive democracy."

Mr Byers, who is advising Mr Blair on the next manifesto, called for a re-elected Labour government to increase home ownership, which has stayed unchanged at about 70 per cent for the past 10 years. "The average cost of a house is £185,000. If you are a child whose parents own their own home, you are going to inherit a very significant asset. If you are a child of one of the 30 per cent in a rented home, there is no £185,000. Home ownership is one of the issues we are going to have to address in a radical third term."

He also called for fresh initiatives to help carers, promote equal pay and Britain to be more "embracing" of Europe. Robin Cook, the former foreign secretary, joked that it sent a chill down his spine if he heard the word "radical" used by senior party figures. He said Labour should speed up efforts to cut child poverty, either cut taxes for the worst off or raise them for the richest, and strongly support the EU as an alternative to the "feral capitalism" of the United States. He suggested Labour should not replace the Trident nuclear programme when it comes up for renewal in 2010.

Mr Cook also warned that victory could not be taken for granted. He said: "I think the map has changed and we are in a different environment in which the campaign for us will be to ensure our voters don't stay home or, even worse, go and vote for the many third parties."

Charles Clarke, the Education and Skills Secretary, emphasised Labour presenting a "green" manifesto. He said the party should expand initiatives such as renewable power, warning that "sustainable development was a crucial problem facing modern Britain".