At the start of this historic third term our party has a tremendous opportunity to re-shape British politics. We have a strong record, a radical agenda and our opponents are in disarray. But we will only realise this opportunity if we understand the nature of the changes we are bringing about in the country and match them by changes in our party.

To govern over long periods requires an understanding of the downside and upside of being in government. It means tough decisions that offend people; turning your back on the fudge, lazy thinking and spasmodic indulgence of opposition; aiming for respect rather than affection; and asking people to change not in theory, but in reality. The upside is that only in government do you achieve what you believe in, and that more than compensates for all the difficulties.

There is, of course, a danger for all progressive parties which we have seen throughout our history: you get elected on a tide of disapproval of a right-wing government; you govern; you get beset by the problems of government; you get attacked by the right; your failings are held up to ridicule; and your principles derided. There is disillusion and disappointment in the air. And at this point, traditionally, part of the left joins in. They say: ‘Yes, you’re right, we are wicked. We are unprincipled. We really haven’t done anything’, and promptly join in an unwitting alliance with the right.

The left believes that the answer to this ‘betrayal’ is to rediscover our ‘principles’, to stop all this ugly temporising with reality, this unfaithful dalliance with compromise. The left merrily persuades itself that the public will at long last go with a more left agenda. Then, at the election, we get a Conservative government.

New Labour has eschewed this path. Partly as a result of the agony of 18 years of opposition and partly thanks to Neil Kinnock’s extraordinary leadership, we arrived in 1997 in government as a different type of party, determined this time it would be different, and it has been.

We have succeeded as New Labour as a modern party, unafraid to take difficult decisions: Bank of England independence; public service reform; being strong on law and order and defence – even when those things involved changes from our past.

But now we face the ultimate challenge: how to make this stick; how to embed it as a permanent frame of mind; how to renew, to take ourselves forward not back. And this includes renewing our party.

As ever, we must start with an analysis of the world in which this renewal must happen. In this we are no different from any country, company, organisation or any other party. There are two things that stand out to me.

First, the nature of modern politics. The old right/left political paradigm doesn’t fit the reality of how we live, think, work and play today. People’s tastes are eclectic and diverse and so are their thoughts. The old fundamental ideologies have gone.

Second, political activity has changed. Traditional party membership has declined. Meetings aren’t attended in the same way. Too often, anyone normal going to a party meeting would not go back. It was Oscar Wilde who said that socialism couldn’t succeed because there weren’t enough evenings in the week. All parties suffer in the same way.

But the conclusions often reached, that there is apathy or disinterest in politics or we have lost our way because we are no longer a progressive government, are simply wrong.

Single-issue pressure groups have thrived, with membership often above that of the main parties. Campaigns like Make Poverty History spark involvement by millions. And there are many examples, not least in the Labour party, of where the general decline in activity is contradicted by particular examples of highly active and motivated local parties that are strongly supported. Labour supporters who were not members were some of the most enthusiastic and effective local campaigners in May.

What is actually going on is far more profound. Like everything else, political activity is being changed by the changes – economic, social and technological – in the world around us. And we have to change again with it. The party must be organised in such a way that it is always the needs of real people, in all their variety, complexity and intensity, which are influencing the party, from its grassroots to its leadership.

Over the next year, we will be consulting the party and its affiliates to try to put together the next stages in party reform to put to next year’s conference. It will involve the following areas.

First, how to open up the party to supporters and levy payers. We now have over 100,000 people we regularly email or are in touch with. The majority aren’t party members but supporters. In Reading, Martin Salter has over 3,000 supporters in addition to party members. We have three million levy-payers. Our connection with them is seldom or not at all, but they are a huge resource of everyday experience. There are stakeholders, supporters and voters in our communities and across the country whom we should bind in to a process of dialogue and partnership.

Second, we need to change the way we organise, recognising that our real strength lies in being an activist party embedded in the local community, rather than in the numbers who attend branch meetings. The changes we agreed this year through the 21st Century Party reforms are a step forward, but we can go further.

In my conference speech, I talked about our party as the change makers. Every part of our party should feel part of the changes we want for our country. Conference saw the launch of a new Labour School Governors’ Network – an opportunity for Labour governors to engage with education ministers, but also for governors to learn from each other as they work for better schools and higher standards. There is a vast store of experience built up in the last American presidential campaign, from the Republicans’ networks of community volunteers to the remarkable use of the internet in the Dean campaign. Let us study it and use it to reform our structures.

Third, on policymaking, we do not want to go back to party conference being an annual masochism festival. The National Policy Forum has been absolutely the right innovation, but we need to build structures around it that allow for ideas and policy to be far more widely discussed and debated. We should find ways of making conference more interesting, more attractive for people to participate in and watch, but don’t let us kid ourselves it could or should be the way we decide often complex and difficult issues. We must open up and turn outward. In the Big Conversation, 40,000 people came to meetings.

Fourth, we should consider, with our affiliates, better ways of involving their members in decision-making. A situation where a block union vote regularly votes down constituency delegates doesn’t do any good for our relationship or credibility. The union relationship is important and we should keep it. In times gone by, it has saved the Labour party from near extinction. But, like everything, it should be modernised for today’s world.

We have come a long way over these past 10 years: from our longest period of opposition to our longest period of government. We did it by knowing when and how to change. The question now then is: do we renew by reforming further, which is the way we came to power, or do we fall prey to the familiar delusions that led us into opposition? Do we say the challenge is the product of time in government and a changing world, or the consequence of principles betrayed and traditions suborned? In short, do we repeat our history or learn from it?