This freethinking paper argues that the Labour Party must work out what comes after New Labour. A vigorous questioning, of the nature undertaken by Gaitskell and the leading social democratic revisionists half a century ago offers vital lessons for Labour's renewal today. Equality, Patrick Diamond writes, must be at heart of Labour's agenda. Yet a clearer vision of more equal society is needed to inspire voters.

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Labour must now work out 'what comes after New Labour' if it is to set the agenda for the next era of British politics, argues influential former Downing Street policy adviser Patrick Diamond in a new Fabian paper Equality Now: The future of revisionism.

In a significant contribution to Labour's internal debate about the party's renewal and how to tackle David Cameron's Conservatives. Diamond warns government ministers to resist the temptation to 'defend every dot and comma of New Labour's record' arguing that a candid debate about both the successes and shortcomings of Labour's record in office is essential for the party to find the 'new ideas and fresh policy energy which are badly needed' to meet new political and policy challenges. Diamond says that Labour's big battle of ideas with the Tory modernisers should be over equality and freedom. As David Cameron seeks to adopt the language of social justice, Labour needs to show why this is incompatible with a 'minimal state' Thatcherite ideology. But Diamond argues that Labour will need to be clearer about its vision of the good society to inspire and mobilize voters and to win the argument that giving people more control over their lives depends on an 'enabling state' which breaks down inequalities and the barriers to people fulfilling their potential. He writes that this will also require a new willingness to debate tax policy – challenging the 'flat tax' with progressive tax reform to reduce taxes for the worst-off – and to provide a 'sharper vision for 21st century education' by ensuring greater diversity and choice are rooted in a clear commitment to social equality.

Honest assessment of how much Labour has changed - a mixed verdict

'Since the General Election, a deeply unhelpful polarisation has opened up within the party. Those who want to defend every 'dot and comma' of New Labour's period in office since 1997 contest others who are willing a return to the 'real' Labour Party of some unspecified past. To embark on either course would have disastrous consequences for Labour's long-term future. No-one wants a return to the factional civil wars of the past. But a party of blind obedience and mindless loyalty has no long-term future', writes Diamond.

'Renewing Labour now depends on an open, constructive, forward-looking debate about the scope and limits of Labour's record in power. This should identify where Labour has made Britain a more social democratic country since 1997, opening up new possibilities for the future. But it should be candid too in areas where Labour's ambitions have been constrained by the failure to win big public debates - sometimes even to launch them - where the party might have done more to dismantle the inheritance of the Thatcher-Major era that preceded it. Any honest assessment would inevitably record a mixed verdict. Britain is a more social democratic country - no incoming government would conceivably reverse the minimum wage, devolution, or the substantial public service investment in schools and the National Health Service. Yet Britain remains deeply conservative - progressive change occurs largely by stealth, and there is still too little ingenuity, innovation and audacity in British society.

What comes after New Labour? 'Learn from Labour's proud revisionist tradition

Diamond's essay, published to mark the 50th anniversary of Hugh Gaitskell's election as leader on December 14th, argues that New Labour made a mistake in presenting itself as entirely new and neglecting its strong roots in the party's revisionist social democratic tradition of Hugh Gaitskell and Tony Crosland. 'This dismissal of past history sets aside the most important lesson for the present. Revisionists revise – and the time has come to apply that lesson to New Labour itself … New insights and new ideas are needed for the party to address the next revisionist challenge: what comes after New Labour'. Diamond argues that the revisionist tradition highlights two key weaknesses in New Labour's ideological approach: Labour needs to make a clearer distinction between means and ends, and to develop a coherent doctrine of equality'.

'Means and ends are still deeply confused under New Labour – as the debate over the future of the public services demonstrates. New Labour has never identified its ultimate ideals. It has sought to define the vision of the enabling state but without clarifying adequately the values framework which underpins it or the vision of the good society it espouses. Neither has New Labour yet defined a coherent doctrine of equality that Gaitskell and Crosland rightly argued must be central to social democracy'

Call to 'revise New Labour shibboleths' with fresh thinking on tax, assets and education

Make 'fairer taxes' clear faultline with 'flat tax' right

Diamond argues for Labour to tackle the issue of taxation head on – by establishing a Progressive Tax Commission to consider the fairness and efficiency of taxes, with the aim of redistributing taxes which currently fall most heavily on the worst-off. 'The tax system is deeply iniquitous because of the burden it imposes on the lowest paid. The rich enjoy generous tax relief. The poor pay a high proportion of their income in indiect taxes and the worst-off pay the highest marginal rates'.

Education: choice agenda must meet equality test

Diamond argues that current controversy over the Education White Paper illustrates 'how limited debate in the Labour Party over education has been since the 1990s'. The current stand-off between the government and the Labour left could be avoided if the government's goal of a genuinely diverse education system to meet the needs of all children was more clearly rooted in a social equality agenda to put the needs of the most disadvantaged first: 'otherwise desirable measures to promote parental choice will further erode the position of the least advantaged'.

• Giving education priority over health in comprehensive spending review: 'The amount spent per pupil in the state education system will have doubled from 1997 to 2008. But it is less in real terms than the UK spent in the 1970s, and it will be wholly insufficient in the next ten years given the scale of under-funding in educational infrastructure that occurred in the 1980s and early 1990s. The decision to give the NHS priority over education in the 2000-02 Spending Review was highly questionable, and should be reversed'.
• Weight funding to need and dramatically reduce class sizes in worst-off areas
• Introduce strong incentives to attract the best to teach in worst-off schools
• Reform 'rigid over-prescriptive National Curriculum' and adopt Baccalaureate

"New ideas and fresh policy energy are badly needed. The challenges facing Britain in 2005 – and even more in 2010 – will not be the same as those of 1994 and 1997. If the big debates of the 1980s were about Britain's economic weakness, and the 1990s about restoring public services and reforming the Constitution, the great debate of the next decade will be about how to give people greater control over their own lives in an age of both unrivalled affluence and unprecedented insecurity. This is the territory on which Labour can win a big public debate to truly make Britain a more social democratic country"

—Patrick Diamond, author of Equality Now: the future of revisionism

"Patrick Diamond is right to say both that New Labour could not last forever and that Labour can find the confidence to root its next generation renewal in the party's revisionist tradition which has always married idealism about the good society with pragmatism about how to adapt this to the real world we live in. This should give the party greater confidence in its ability to win the battle of ideas. Labour's revisionist tradition provides a strong link from the ideals of Crosland and Gaitskell to the challenges which will face Gordon Brown before the next election. By contrast, the main Tory moderate 'wet' tradition has all but died out with the generation of Heseltine and Clarke. The new would-be Tory modernisers – Cameron, Osborne and Letwin – are Thatcher's children and so must start from scratch' if they are serious about creating an electable British centre-right'"

—Sunder Katwala, General Secretary, Fabian Society