Tony Blair delivered a warning that Labour’s resistance to austerity and welfare cuts risked reducing it to a party of protest.
In a dig at Ed Miliband, the former prime minister said the political centre ground had not shifted to the left in the wake of the credit crunch.
He highlighted the danger of returning to the dividing lines of the 1980s, when Labour championed the “status quo” and languished in opposition to Margaret Thatcher’s Tories while flatly rejecting the argument New Labour “created” the financial crisis.
However the crisis occurred, he said: “no one can get permission to govern unless they deal with its reality.”
He added: “The Conservative Party is back clothing itself in the mantle of fiscal responsibility, buttressed by moves against ‘benefit scroungers’, immigrants squeezing out British workers and, of course, Labour profligacy.
“The Labour Party is back as the party opposing Tory cuts, highlighting the cruel consequences of Conservative policies on welfare and representing the disadvantaged and vulnerable (the Lib Dems are in a bit of a fix, frankly).”
Mr Blair said the scenario was “less menacing than it seems” for the Tories.
“They are now going to inspire loathing on the left, but they’re used to that,” he said.
“They’re back on the old territory of harsh reality, tough decisions, piercing the supposed veil of idealistic fantasy that prevents the left from governing sensibly.
“For Labour, the opposite is true. This scenario is more menacing than it seems.”
Mr Blair said “the case for fundamental reform of the post war state is clear”, and urged the Labour leadership to ask itself questions such as: “What is driving the rise in housing benefit spending, and if it is the absence of housing, how do we build more?”
A Labour spokesman said: “It is always important to listen to Tony Blair because he has important points to make, including in this article where he emphasises our top priority must be growth and jobs.
“As he was the first to recognise, politics always has to move on to cope with new challenges and different circumstances.
“For example, on immigration, Labour is learning lessons about the mistakes in office and crafting an immigration policy that will make Britain’s diversity work for all not just a few.
“It is by challenging old ways of doing things, showing we have understood what we did right and wrong during our time in office that One Nation Labour will win back people’s trust.”