The Liberal Democrats obviously believed they could win – that’s why they went through the rigmarole of the election court, and calling the by-election in the cold and mist of January to prevent Labour’s campaign heating up. Clegg threw the kitchen sink at it, and the Tories obligingly gave the Liberal Democrats a free run. Cameron didn’t even bother to learn the name of the Tory candidate.

Yet the coalition strategy failed. It failed for complex reasons, in this most complex of seats. Partly it failed because Elwyn Watkins looked like a sore loser. It failed because Phil Woolas had worked the patch hard, and had a residual base of support. Debbie Abrahams was a credible candidate. It may seem that the Liberal Democrat vote held up – but this fails to recognise the incredible amount of churn that took place yesterday. Liberal Democrat voters deserted in droves, but Tory switchers topped up the Liberal Democrat total. Labour voters came out, thanks to a magnificent campaign, and levels of energy unseen since the glory days of the mid-1990s. But the main reason the coalition strategy failed was the unpopularity of the government’s policies. A toxic mix of broken promises, unpopular cuts, patronising, out-of-touch ministers and disappointed voters created a thumping defeat for the coalition parties.

It is already well understood by Labour’s high command that, although a defeat for Labour would have been catastrophic, a victory does not warrant celebrations. There will be no sleepwalking into the next election. In the period leading up to the 1992 election, Labour triumphed in by-elections. Labour’s Ashok Kumar took Langbaurgh from the Tories. In Monmouth, Huw Edwards took the seat for Labour. In Mid-Staffordshire and Vale of Glamorgan the pattern was the same. The by-election victories were cruel illusions, creating undeserved hope in the hearts of Labour supporters. Labour was the recipient of protest votes against Margaret Thatcher, but failed to win support on the merits of its own programme or alternative prime minister. 1992 was perhaps the cruellest of defeats, because victory was possible. At Labour’s celebration party on election night, the champagne remained unopened.

The lessons from Thursday are that hard Labour campaigning can turn out the vote. But the lessons from history are that by-election victories can be a chimera. Unless Ed Miliband steps up the process of modernisation of Labour’s programme and organisation, the first step on the road might lead only off a cliff.

This weekend’s Fabian Society conference gives Ed Miliband the opportunity to set out Labour’s alternative. On the economy, he needs to nail the ‘deficit denier’ lie by showing how Labour would tackle the deficit and waste. On public services, he needs to show how Labour would make them more responsive to citizens’ demands. On law and order, he must show that Labour would support communities in their fight against antisocial behaviour. It needs to a gimmick-free speech, and avoid the temptation of facile soundbites: Clegg’s ‘alarm clock Britain’ disaster serves as a warning. The presence of Bob Roberts and Tom Baldwin, his director of news and head of communications, at the back of the hall will provide some reassuring professionalism. Ed’s speech doesn’t need to be policy-rich. But it does need to demonstrate clearly that Ed’s appreciation of the scale of the task is not muddled by the result in Oldham East and Saddleworth. Any whiff of complacency at Saturday morning’s event, and the real winner from the by-election is David Cameron.