David Clark: Why can't you be bold and brave at home as well, Mr Blair?

'Frustration with New Labour's minimalism is felt most by those who supported its vision'

After the events of 11 September, the general election seems a diminished thing. We have almost forgotten about the scale of Labour's second landslide victory in June, or indeed, the despondency that accompanied it.

For many Labour Party members, our victory felt like a defeat. On taxation, we shackled ourselves once again to a policy that precludes any meaningful redistribution of wealth. Our stance on asylum was one that any self-respecting progressive should have felt thoroughly ashamed of. We tried to win the debate on Europe by refusing to engage in it. The "radicalism" of our second term agenda seems to consist of little more than a bland managerial reformism.

Tony Blair dismisses such concerns, which will be murmured by more than the usual suspects at the edges of this week's party conference in Brighton, at his peril. Frustration at the Government's direction is no longer confined to the vestigial remains of the hard left – it is shared by many of those who pioneered modernisation and supported New Labour's most radical ambitions. At stake is the alliance between old right and soft left that has sustained Labour's forward momentum since Neil Kinnock became leader. Without it, Tony Blair risks a rupture between party and Government of the kind that destroyed Labour in the 1970s.

There is a paradox at the heart of New Labour. Often described as "the project", the original New Labour vision embraced two distinct but related projects. The first was to modernise Labour and make it electable by reconciling the left to elements of the Thatcherite consensus. The second was to modernise Britain and establish the basis for a new progressive consensus. One provided the means, the other defined the ends.

The relationship between these elements has been one of tension as well as dependency: to transform Britain, Labour needs to win power, whereas to win power, Labour needs to build broad electoral coalitions that are often threatened by change. What has defined New Labour in power has been an increasing reluctance to risk electoral capital in the pursuit of a radical vision for Britain, in a sense, to put means before ends. It used to be said that the Conservative Party's mission was to occupy office in order to deny it to others. To many, that self-perpetuating electoralism now appears to be the summit of Blair's ambition.

If the essence of radicalism is change, its agency is a political leadership prepared to challenge the prevailing consensus. New Labour has eschewed a leadership role in favour of an approach that consists of finding out what people think through focus groups and repeating it back to them. As a strategy for winning and holding power, it has been a stunning success. As a strategy for transforming society, it is doomed to fail.

Looking at its second-term agenda, it is difficult to avoid the conclusion that New Labour's most radical years are already behind it. Like Harold Wilson and Bill Clinton, Tony Blair is in danger of being remembered as a progressive leader whose most significant achievement was simply to have held office.

Frustration with New Labour's minimalism is most acutely felt by those elements of the soft left that supported its modernising vision. In response, many of its leading figures have begun the task of defining a post-Blairite alternative. Its broad outline is already becoming visible.

A key feature is a renewed emphasis on social and economic equality. New Labour has abandoned the objective of wealth redistribution through fair taxation and, as a consequence, inequality has grown since 1997. Tensions over taxation and public spending will be impossible to contain with lower than projected growth. The Government will either have to cut its promised spending programme or break its pledge not to raise the basic or higher rate of tax. It is Labour's commitment to public investment that must prevail.

We need a more critical analysis of the role of markets. The mainstream left accepts a dynamic market economy as the basis for a just society, but is suspicious of the extent to which Blair equates commercial interests with the general interest. Markets can generate wealth and promote efficiency, but they do not guarantee just outcomes or promote social objectives. More private sector involvement in public services must be contingent on evidence that it provides better value for money. It's what works that counts, but what works must be defined on public service criteria.

A progressive century will remain elusive as long as British politics is reduced to a competition for the mythical centre-ground as defined by a small, prosperous section of the electorate. No progressive agenda can be complete therefore without a commitment to electoral reform. The experience of Scotland and Wales challenges the left's tribalism: pluralism is compatible with radicalism.

A progressive politics must be less sanguine about globalisation. Simply asserting that "globalisation is good for you" is inadequate in a world experiencing greater disparities of wealth and power. We do not want to turn the clock back to the era of national trade barriers, but the free flows of goods and capital must be balanced by a global compact to direct more of its benefits to the world's poorest. Labour must build on its good record on debt and development by making a more explicit break with the Washington Consensus and its adherence to neo-liberal solutions.

Engagement in Europe is essential. Our mid-Atlantic position on social and economic policy has resulted in the worst of both worlds: continental levels of taxation and American levels of public squalor. The European model of capitalist development has many problems, but it is an alternative that progressives should seek to strengthen and modernise. We will not be able to do so from outside the eurozone.

Talk of the "radical second term" cannot disguise the lack of ambition in Labour's programme. If Blair is to to engineer a shift in the direction of British politics he will need to be bolder and to take more risks of the kind that he has taken in foreign affairs. The impetus for this must come from New Labour's new left.

The writer was special adviser to Robin Cook from 1994 to 2001