Despite the continuing difficulties over party funding, the new year has begun with a determined attempt by the government to right itself following the storms which blew it off course during the last few months of 2007. Announcements on nuclear power, the health service, and immigration show a desire to tackle the long-term challenges facing the country.

But questions about the party’s future direction remain: Labour still has a choice to make about how it intends to approach the next general election and a possible fourth term in government.

On the one hand, the party can reassure itself that the government’s apparent unpopularity has not been translated into a deep desire on the part of the public to elect a Tory government. The Conservatives may have addressed many of their negatives and thus established a consistent lead in the opinion polls, but dig underneath the headline figures and doubts about the party, its ability to govern and its leadership remain.

And the Conservatives’ fundamental problem is that the country is not undergoing the kind of political sea- change that it has experienced in the run-up to the landmark elections – 1945, 1964, 1979 and 1997 – of the post-war period. Instead, the volatility of the opinion polls suggest a politics in flux with voters making rapid and snap judgements about unconnected political episodes and events.

This analysis could lead Labour to adopt a ‘safety first’ approach; banking on the Conservatives’ underlying lack of credibility and the traditional recovery which most – though not all – incumbent governments experience as they move from mid-term towards a general election, to see it through. The current economic difficulties increase the appeal of such an approach.

It is not without dangers, however. Last year’s Australian general election proved that playing the economic and experience cards is not always enough. Moreover, even if such an approach did see Labour returned to power, there is a real risk that the party ends up simply mimicking the Conservative tactics and strategy of 1992. The consequences of the manner in which John Major won that election were, over the medium to long term, disastrous for his party. Not only did the Tories scrape back with a small majority, but, more importantly, they lacked both a mandate and a programme for government, causing much of the listlessness which allowed Labour to recover and drive them from office in 1997.

The alternative is clear: instead of winning like the Tories did in 1992, Labour needs to win like it did in 1997 – with a sense of promise and hope which connect with the country and the challenges of the time. We need a positive case for a fourth term Labour government.

Progress intends to be at the forefront of this debate. This issue we’re launching the Progressive Challenge: Where now for New Labour? with a look at the first of the five themes – welfare reform, public service reform, criminal justice, immigration and progressive internationalism – that will feature in our publications and events over the course of 2008.

Our analysis begins with a recognition of how the country has changed over the past ten years and the challenges which lie ahead. The politics of the 1990s is old news: the time which has elapsed since Black Wednesday is the same as the period between Margaret Thatcher’s victory in 1979 and Tony Blair’s election as Labour leader in 1994. If we consider the scale of the change which took place in Britain, and indeed the Labour party, during those years, we can get a sense of the journey the country has been on over the past decade and a half.

Thanks to a Labour government there has been a sustained attempt to tackle and overcome many of the most serious challenges of the 1990s: decaying public services, mass unemployment and deprivation, an archaic constitution, and a totally dysfunctional relationship between Britain and our partners in the European Union.

But the challenges of the early 21st century are no less in scale and our ambitions to meet them must be a worthy match. First, we need to acknowledge that the country’s concerns have evolved and reordered over the past ten years. Some issues – security and identity and migration, for instance – are simply much more salient than they were a decade ago. On others – like public services – the focus has shifted from worries about basic standards and quality, to a desire for factors such as responsiveness, individual and community choice and control, and accountability to be more fully addressed.

Second, we need to recognise and address the paradoxical nature of the current public mood: while voters demand ambitious policy ends, they are increasingly resistant to the means to reach those ends; that there’s a widespread belief that the traditional levers to effect change – from the ballot box to government activism – are ceasing to function as they once did; and that the optimism people feel about their own lives seems to be matched by a deep social pessimism.

The conflicted nature of people’s attitudes is exemplified by globalisation, where voters continue to wish to receive the fruits of the global economy – the cheap goods and opportunities to travel and work abroad more easily – but are increasingly dismayed about its downsides, feeling victims of forces they can neither control nor fully understand. The benefits and challenges presented by immigration offers a similar example.

The task for progressives is not to ignore these concerns but to engage in a frank and open discourse with the public: explaining the trade-offs while also attempting to address the fears. New Labour was right to embrace the market economy in the 1990s; but we need to find a new way of ensuring that people get a fair deal from the global economy. Simply telling people that they must accept – and adapt to – the challenge of globalisation will not do.

Third, we need to provide a stronger narrative about the overall purpose of a Labour government and the direction it wishes to take the country in. In 1997, our pledges – though intentionally small – told a wider story about Labour’s values and intentions. Today, the public needs a clearer sense of the concrete priorities to which we are committed and these priorities need to symbolise our ideals and principles.

Finally, we need to accept that politics has changed. The public no longer view the Conservatives as the ‘nasty party’ of the 1990s. We are now engaged in a serious fight for the centre ground with a party which is socially more liberal and constantly engaging in counter-intuitive positioning. The battle lines of the last decade are not those of the next; attempting to resurrect them could be as disastrous as the Tory ‘New Labour, New Danger’ strategy of 1996. Winning the argument with the public for a fourth Labour term cannot rest on a characterisation of our opponents which the voters really don’t recognise.

We thus cannot fight the next election as we fought the last three. And even if we were inclined to, the Conservatives will not let us. Having succumbed to them three times, the Tories know Labour’s attack lines; the defences they have erected against them are unlikely to be breached next time.

But there remains a fundamental divide between Labour and the Conservatives and that concerns the role of the state. Cameron’s famous formulation – ‘there is such a thing as society, it’s just not the same as the state’ – shows that the Tory leader has been willing to break with the Thatcherite view that the individual’s sense of responsibility goes no further than themselves and their families. He has thus been forced to accept the progressive case for ‘social responsibility’ when it comes to a range of problems from tackling poverty to arresting climate change.

What Cameron has been unwilling to do, however, is to break with the other key tenet of Thatcherism: that the role of the right is to ‘roll back the state’ and that government is the problem, not part of the solution. The Tory leader’s dilemma, though, is that government is a vital, though certainly not sole, means to achieving the ends he claims to will.

But Labour’s relationship with the state is not without problems, too. We seem too often confused about where and when government should or should not act; unsurprisingly, the voters seem to swing between a belief that government is ‘over-reaching’ itself and that it is failing to act when it should. Politically, this uncertainty brings with it the risk that the Tory line of attack on Labour – that we are operating an out-of-touch statist Leviathan – may begin to resonate with the voters.

We must not allow the choice, as the right would have it, to be between ‘big government’ and the ‘small state’. Instead, progressives must frame the choice between the modern right and left as being between our vision of an enabling state and their dogmatic attachment to minimal government. The New Labour agenda for the future must begin, therefore, with an unambiguous assertion about our view of government.

This will mean four things. First, New Labour must be clear about the essential and benign role of the state in fostering citizenship, expanding opportunity, and providing security. We must make the case that the challenges and concerns of the voters can only be met if government plays its part.

Second, New Labour must lead a real and substantive shift in the party’s thinking about the role of the state. There is now among ministers a strong rhetorical commitment to devolution to localities. But while commentators and the public complain about government centralisation the same people rage about ‘postcode lotteries’. Real devolution will require consistency and toughness.

Third, this will mean a much changed role for Whitehall, where government will have to learn to do some things much better, and others less or not at all. Social justice and public credibility demand that the centre intervenes fast and effectively when basic services fail. But when it comes to moving beyond satisfactory, Whitehall’s job is to provide advice, support and the right policy framework while saying loud and clear that it is down to local decision makers, service providers and citizens to innovate and achieve excellence.

Finally, New Labour needs to forge a new sense of the relationship between citizen and state. This will open up a debate not simply about new methods of policy making (from ensuring greater transparency, new forms of deliberation, and consultation at all levels of government and where taxpayers’ money is spent), but also about the contract between the individual and the government. Greater reciprocity – making support and conditionality the twin pillars of the modern welfare state – and a stronger framework of entitlements and expectations must rest at the heart of this new agenda.

For too long debate within the Labour party has been viewed simply through the prism of the relationship between the prime minister and his predecessor. The election of Gordon Brown last summer gives the party an opportunity to escape this dynamic: developing a future agenda which is post-Blair, not anti-Blair; building on the achievements of the past decade, not running away from them. We now have the chance to have a frank and open debate about the future of New Labour. Let it begin.