This may come as a surprise, but Labour's first term was marked by a fierce ideological battle. I do not mean a battle between ideologies. The party's icy self-discipline ensured that barely a ripple of dissent, let alone the splash of philosophical argument, disturbed the unnatural calm of the government's waters. No: the ideological conflict that raged was over whether or not to have an ideology at all.
One might characterise this battle as the Third Way v the Big Tent. On the one hand, Tony Blair wanted to claim not just that new Labour's programme was intellectually coherent, but also that it represented a distinctive philosophy in its own right. Yet at the same time, the government went out of its way to ensure the widest possible support by rejecting traditional philosophical distinctions. "What matters is what works," ministers insisted.
There are good reasons why new Labour should have this ambivalent stance towards philosophical clarity. Once you define your position, you define some people in and others out. When you reveal what you stand for, you also reveal what you don't stand for - and make enemies as well as supporters.
But the inclusiveness of philosophical ambiguity - vindicated, it seems, in the election victory - comes at a price. Breadth and depth are in conflict. Lack of ideological definition brings many on board, but few with conviction. The landslide may cover a large area, when only a thin layer of topsoil has moved.
Does any of this matter in the second term? Are not the broad coalition and the landslide majority enough? The answers are almost certainly that it does, and that they are not. The second Labour administration will need to define its ideological position much more clearly and boldly - even if this means sacrificing some of the breadth of its political support.
The danger for Labour is that it faces much tougher challenges in the second term: an economic downturn, a stronger opposition, a more hostile media, perhaps. The excuses for failure to deliver better public services may run out.
In these circumstances, a government needs a strong ideological "narrative". A strong narrative will explain what it is trying to do and where it is going, even when its success in getting there is not wholly apparent. When hospitals and schools are not improving as fast (or as noticeably) as the public want, when the railways are still mired in under-invested disorganisation, when the trend of unemployment is up not down, a clearly articulated philosophy will help to explain, nevertheless, what Labour believes in and where it is headed. It can make public support less dependent on the facts of change and more on the values and intentions behind them.
This was Margaret Thatcher's great triumph. Even when her policies stuttered, her public standing for most of the 1980s remained high, because it was based as much on what she stood for as on what she actually achieved. Moreover, Thatcher tried not just to transform the country, but to change the people as well. She sought to remake the British public in her own image - individualistic, materialistic, anti-European. In the same way, Labour should be seeking to bring out the social democratic values that equally beat in the British public's heart - belief in tax-funded public services, in equality of opportunity, in a progressive and liberal outlook. In short, it should aim to shift the entire political culture and mindset of the UK towards the left.
The election shows that it has already begun to do this. But if this shift is to be permanent, the government must talk as well as act. Labour must not simply spend more on public services, but must explain the values that underpin universal, tax-funded provision. It must not only redistribute income, but promote the idea of a more equal society. It must not only be more liberal in areas such as criminal justice, asylum and freedom of information, but show why this makes us a better, more civilised community.
But can new Labour find a coherent ideological narrative of this kind? It is now fairly obvious what such a narrative will not be. The Third Way may, as Anthony Giddens has argued, be a helpful label for similar kinds of policy approaches practised by centre-left governments all over the world; but it is not a political philosophy.
One reason for this is evident. It is almost impossible to generate clear ideological definition where conflict between alternatives is denied. In an adaptation of Newton's Third Law of Motion, Giddens's Third Way argues that for every belief acting upon us, we can hold an equal and opposite one. There is no need, therefore, to choose between social justice and economic efficiency; free markets and state regulation; higher public expenditure and low taxes; "family values" and social liberalism. All this may well be valid in practice. Government is almost inevitably a matter of finding compromises between conflicting principles. But this cannot be the basis for ideological definition. At a rhetorical level, if not in action, one side or other has to be emphasised.
But there's a second and more subtle reason why the Third Way doesn't perform the required philosophical task. It concerns the relationships between means and ends.
One of Tony Blair's most insistent arguments has been that only political ends - goals and values - matter; there should be no "dogmas" concerning the means or policy approaches one uses to realise them. This is what marks the Third Way out from old ideas about social democracy. "The fundamentalist left made nationalisation and state control an end in itself, hardening policy prescription into ideology," the Prime Minister wrote in a Fabian pamphlet. "[But] what matters is what works to give effect to our values. Some commentators are disconcerted by this insistence on fixed values and goals but pragmatism about means. There are even claims that it is unprincipled. But I believe that a crucial dimension of the Third Way is that policies flow from values, not vice versa."
The last point is clearly right. But there is an error in the argument. This is the presumption that means, or policy approaches, have no philosophical content in themselves; they are simply neutral agents of value-based ends. But means embody values, too. It matters whether governments promote markets or regulation; whether they use public sector institutions or private firms, universal welfare benefits or means-tested ones, centralised or decentralised governance. It matters because different policies and institutions create different kinds of society.
It is simply not true, for example, that there is no philosophical difference between using the public sector and using private firms to deliver services. This is not a matter of efficiency - though there may be differences here, too - but of values. Public sector institutions embody an ideal of public service, defined by the need of the service user, not his or her market power. They give flesh to the idea of community - they are "ours". Think of the way we talk about "our schools" and "our hospitals", and the public's sense of ownership of the NHS. We don't talk about our Tesco or our Railtrack.
Public institutions create a "public realm", a space in which the huge diversity of individuals who make up society come together to provide for their collective needs, and in which non-market values rule. Having a strong public sector, and promoting its worth, is therefore an end in itself, not simply a means to other ends.
None of this is to preclude the use of the private sector in public service delivery, particularly where it can promote efficiency. It is simply to argue that a society where public services were mainly provided by private firms - with merely a residual contract-defining public realm - would be very different from one in which the dominant institutions and values were public. It is not "dogma" to be concerned about such things: means are ends, too.
It is here that a coherent ideological narrative for Labour's second term begins to form. The central tenet is very simple. It is a belief in government. Democratic government represents the community to which we belong, giving it institutional form. Government performs tasks and provides services that individuals cannot on their own. An active government is needed to shape and constrain the powerful forces of the global market and to protect us from its vagaries. Government is good.
In philosophical terms, it is arguable that this is really what the 2001 election was about: Labour, which believes in government, against a Conservative Party that doesn't, that wishes to see a radically smaller state, with much higher private purchasing of health, educational and welfare services, and economic deregulation.
It would be encouraging to interpret the result as a decisive vote in favour of active government. Yet we can't quite say that it was - not just because ideology was clearly not the principal reason for the Conservatives' defeat, but because new Labour has not really made the full philosophical case for the active state. Yes, it does now make a strong argument for investment in public services; a case that was not being made before the public spending shackles were released in 1998-99. And in many ways, the government has adopted an "active state" approach, full of initiatives and schemes of policy engineering. But, at a rhetorical level, it is still not the basic worth and importance of government that has been new Labour's dominant idea. It still sees government as a means, not an end in itself; and, as such, not the focus of its narrative.
There's a helpful Third Way trope that can be used here: the role of government today is neither that of the old left nor the new right. The old left believed that governments could run the economy and manage people's lives. Governments owned the major industries, intervened strongly in economic demand and trade, provided people's homes and pensions, and maintained large, uniform bureaucracies. Most of us no longer believe that governments can or should do these things. But we do not accept the new right view, either - that they should have only residual functions of providing law and order, external defence and a social safety net.
Today, social democrats can say, government has five core and vital roles. First, it provides the essential framework for a market economy: regulation that promotes competition and social and environmental protection. Today, this must occur on an international as well as a national scale: hence the importance of, for example, the European Union and (with some reform) the World Trade Organisation. Consumer protection, labour standards and environmental regulation are all critical. At the same time, an active government is needed to ensure that individuals can adapt to changing labour markets through education and training. It can help disadvantaged regions regenerate economic development. It can help support new technologies and industries. The economic role of the active state has changed, but it has not diminished.
Second, government provides public services - from education and health to refuse collection and public transport, from social services to museums and art galleries, from policing to countryside management - that the market cannot provide, or only inequitably. These services deliver personal benefits to individuals, but they also shape the nature of society and bind us together within it.
Third, government mitigates market inequalities. Markets not only generate but perpetuate inequalities of income and wealth, which quickly solidify into social division. Only an active state can work against these: both by redistributing income through the taxation and benefit systems and by the active provision of "opportunity-enhancing" services. As Labour has shown, many can be delivered directly as benefits from government to the individual: "baby bonds", individual learning accounts, support for childcare, maternity and paternity allowances, family support services and so on.
Fourth, government can protect the quality of life against the intrusions of the market economy. Increasingly, market competition drives deeper into formerly non-market spheres. Working hours get longer and jobs more stressed, thus affecting family life. Environmental pollution and degradation increase. Local communities, particularly in urban areas, are hollowed out. Governments can regulate working time to help individuals find a better work-life balance; protect and enhance the natural environment; improve public spaces and the "liveability" of urban environments; create a sense of community belonging and civic pride.
Fifth, governments can help to create conditions of global security. Acting in concert, and through international institutions, governments can reduce conflict, protect the environment and help to eliminate poverty.
Together, this provides a clear basis for an ideological narrative centred on the value and importance of government. Against the Conservative view that the role of the state should be reduced, Labour's social democratic narrative should show just how much we need government and how much it can do. Nearly all of Labour's current policies fit such a narrative well. But the government needs to be bolder and clearer - in three areas particularly.
First, taxation. Labour has been articulate in defence of public spending; but it has been unwilling to make the other half of the case and argue positively for taxation. Leaving aside the danger of a shortfall in the Treasury's projected revenues after 2004, the British need to be reminded that they cannot enjoy high-quality public services unless they are willing to pay for them. This is a crucial element in replicating the Thatcher achievement, and changing the British people. At 37 per cent, Britain takes 4 per cent less of its national income in tax than the EU average - the equivalent of £40bn a year. Making the case for government is in one sense to persuade the British to become a modern European country.
Second, business regulation. Labour's record is not as exclusively pro-business as its critics often claim: the minimum wage, legislation on trade union rights and working time, and the climate change levy all represent significant incursions into business freedom. But at a rhetorical level, the general attitude towards regulation was largely hostile in the first term. The impression was sometimes given that the interests of business more or less constituted the interests of the country.
Making the case for active government does not mean the imposition of a huge, new interventionist agenda. But it does mean articulating the case for business to be regulated for the common good. Fair regulation provides the framework for economic activity; there are social goals and values that should take precedence over the simple promotion of economic efficiency, and it is the government's role to support these. In such areas as the environment and working time (particularly flexible working and parental leave), Labour needs to show how the promotion of quality of life is as much the role of the state as narrower economic prosperity - even when this is opposed to the short-term interests of business.
Third, the public sector. Labour has indicated that it will seek to increase the use of private firms in the delivery of public services. But it should not, by this means, denigrate the public sector, as it sometimes allowed itself to do in the first term. There is no question that parts of the public sector perform badly and need to be improved.
But this is true, too, of many private firms - Railtrack is hardly a shining example of private sector management, and many other failing companies could be cited. An ideological narrative of active government needs to uphold the worth of the public sector and the public realm, even while setting about a vigorous programme of improving it.
Much will depend here on how and where the private sector is introduced. If private sector firms are used to benchmark good practice and provide a spur to improve the efficiency and dynamism of public sector management, this should be welcomed. But wholesale replacement of public by private providers would represent an attack on the public realm itself. It is one thing to use private contractors for easily definable services such as refuse collection; it is another to invite them to make judgements about health needs and educational priorities, thus introducing market values and motivations into the very nature of public services.
There is a further point. Active government needs an active democracy. Government is not just administration: it is the exercise of power lent from the people, and the resolution of political debate conducted among them. A strong public realm requires a democracy in which such debate can be exercised. So the completion of Labour's agenda of constitutional reform - in parliament, through devolution and through local government renewal - is a crucial part of the narrative.
It may seem odd to place such stress on how the Labour government should talk rather than on how it should act. But talking - articulating ideals and values, persuading and educating - is a crucial and often neglected part of government. Only with a clear and defining ideological narrative will Labour achieve its historic mission to relocate the centre of gravity of British politics on the centre left.
The transformation of Britain must occur not only in changes "on the ground", but in the hearts and minds of the people.
Michael Jacobs is general secretary of the Fabian Society. This is an edited extract from Transforming Britain: Labour's second term, edited by Adrian Harvey. Available from the Fabian Society, 11 Dartmouth Street, London SW1H 9BN (£6.95)