In the 20th century the key political battleground in British politics was the relationship between the state and the citizen. Labour traditionally favoured the collective, the Conservatives the individual. New Labour realigned those ancient nostrums by becoming as comfortable with the notion of aspiration as redistribution. This change allowed us to claim victory in the battle of ideas over the past decade. The challenges we are now witnessing in the 21st century call for further change. Victory in the battle of ideas over the next decade will go to the party that can facilitate a paradigm shift in the relationship between state and citizen.

Interestingly, all three main political parties are toying with the notion of moving power from one to the other. Nick Clegg wants a "People's NHS" to realign the Liberal Democrats as less big-state and more individual-citizen, but many in his party oppose such talk. David Cameron talks of "shifting power from the state" to charities and communities, but they simply lack the capacity to deal with the modern challenges brought by a globalised economy and a diversified society. And while it is welcome that Gordon Brown embraces "a new politics that places power . . . in the hands of people themselves", a splurge of Whitehall initiatives seems to point in the opposite direction. This half-in, half-out approach won't work. Uncertainty has to make way for clarity.

Some of new Labour's most senior and thoughtful leaders are arguing the case for change and suggesting how it might be done. They are calling for a new marriage between an active state and active citizens, with each empowering the other. There are three principal reasons - at least from the point of view of progressive politics - for leading this change.

The case for change

The first is born of failure: the growing gap between politics and the public. In the UK, membership of political parties has halved in the past 25 years. But our country is far from alone in witnessing record levels of cynicism and disengagement. Average turnout at national elections across the OECD has fallen by 10 per cent in just 20 years. And yet, in many respects, public involvement in civil society is increasing, not diminishing. Half of all Britons volunteer regularly. Over one-third of people who don't vote at general elections do participate in a charity, community group or campaign. Alternative forms of political activity - whether boycotting goods or lobbying MPs - is rising, not falling. And while 61 per cent of people do not believe they can influence decisions about their local area, 63 per cent say they are prepared to do so. My conclusion is that the public is not so much turned off by politics, as by the way politics is done. Or, for that matter, the way public services are run. Public disengagement is a symptom of disempowerment. Too often we shut people out when we should be letting them in.

Our political system was framed in an era of elitism, when rulers ruled and the ruled were grateful

Second, such a change is in keeping with the times. In a world of massive insecurity and constant change, people are looking for greater control in their lives. At the same time, public expectations have rightly moved up a gear. People nowadays are more informed and inquiring. Ordinary consumers are getting a taste for greater power and more say. The problem, a decade after Bill Clinton declared an end to the era of big government, is that while people may have become more empowered as consumers, they do not yet feel empowered as citizens. Ours remains a "them and us" political system. It was framed in an era of elitism. Rulers ruled - and the ruled were grateful. Economic advance and universal education have swept aside both deference and ignorance. Now the internet redistributes knowledge and offers us the chance of being active parti cipants rather than passive bystanders. These changes open up the potential for a more participatory form of democracy.

Third, equity demands that it should be so. Despite rises in living standards and falls in poverty in the past decade, a deep inequality gap still scars our country. We all pay the price: the wasted potential of the alienated young; the taxpayers who pay the price of social failure; and the decent, hard-working families that live in fear of crime. Over many decades social mobility slowed down when it ought to have been speeding up. Action by this government has halted that process. The glass ceiling has been raised, but it has not yet been broken.

I believe it can only be done by shifting the focus beyond the welfare-state solution of retrospectively correcting the symptoms of inequality - such as low wages and family poverty - towards an approach that proactively deals with the roots of disadvantage before they become entrenched. By cutting taxes for the low-paid. By giving more people a real stake in society. By enabling people, regardless of wealth or status, to take greater control over their lives. By recognising that it is power that needs to be more fairly shared in our society. The sense of hopelessness that clouds the poorest communities in our country grows out of disempowerment. Of course beating crime, creating jobs and rebuilding estates can help. But I believe that this cloud of despondency can only be dispelled through a modern, participatory politics that allows both local communities and individual citizens to share more evenly and directly in power.

These fundamental shifts in the structure and culture of 21st-century Britain call for new Labour to resolve its ambivalence about the modern roles of the state and the citizen. From the mid-19th century the state took on more responsibilities. In large part this accretion of power was necessary and it was right. State action was needed to guarantee clean water and safe streets. The expansion of a market economy relied on legal rights and clear rules which, again, only the state could uphold. And in the creation of the welfare state - with its jewel in the crown, the National Health Service - the state offered equity and security as an antidote to the deprivation and injustice of an era of economic upheaval and total war in a way that charitable endeavour and employer philanthropy could never hope to match.

And yet, by the last quarter of the 20th century, it was becoming clear that too much state could be as bad as too little. When Labour got on the wrong side of that argument, we lost. The Berlin Wall was about to tumble and with it the ideological perversity of state communism. In econo mic policy, western governments had demonstrated a poor record of picking winners, but losers had developed a consistent habit of picking governments. State regulation had come to stifle market innovation. So, in the Thatcherite reforms of the 1980s - most notably the privatisation programme - power was moved from the state to the market. And in the new Labour reforms of this century - most notably the creation of institutions such as an independent Bank of England, NHS foundation hospitals, city academies and now trust schools - power has been moved again from the state to new service providers. What neither Thatcherism nor Blair ism has successfully done is moved power from the state to the individual or to the community.

Labour's choice

For the past decade new Labour has been caught between two philosophical traditions: a Fabian social-democratic model, where progress is secured through the state exercising power on behalf of citizens, and a mutual model, where it is secured not through the state controlling, but the state empowering communities and citizens to realise their own advance. Of course these traditions share common ends - the eradication of poverty, for example - but they prioritise different means: the dispensing of state benefits on the one side and the opening up of educational opportunities on the other. The twin changes we are now witnessing - globalised economies and assertive citizens - call for this decades-long divide between statists and mutualists to be resolved decisively in favour of the latter.

Too often, governments - including new Lab our - have fallen for the fallacy that once the commanding heights of the state have been seized through periodic elections, progressive change automatically follows. In truth this works neither for citizens nor for governments. People are left confused and disempowered. Governments end up nationalising responsibility when things go wrong without necessarily having the levers to put them right. Progress in the future depends on sharing responsibility with citizens so that they become insiders, not outsiders.

None of this suggests the state has no role. Quite the reverse. Economic uncertainty and mass migration, global warming and global terror make the case for an active state. People want to know they are not alone. But they also want to control their own destiny. So the modern state has to step forward where citizens individually cannot act - providing collective security and opportunity - but step back where citizens in dividually can - exercising personal choice and responsibility.

Cameron and his Conservative Party have drawn the wrong conclusion from the modern world. It is not an active state or active citizens that are needed to meet the challenges of the modern world. It is both. It is only the state that can equalise opportunities throughout life and empower its citizens. Equally, only citizens can seize those opportunities and realise their own aspirations to progress. The right wrongly rejects the state's role. What is needed is a different sort of state: one that empowers, not controls.

A future agenda

This narrative should run through government policy like through a stick of rock. A new assumption should guide the whole government's policy: power should be located at the lowest possible level consistent with the wider public good. That would involve Whitehall being scaled back. Local police and health services would be made directly accountable to local people through the ballot box. Local councils would be freed from much central government control as their system of financing moved from national taxes to local ones, with local communities having the right through referenda to determine locally decided tax rates. As in the United States, Canada, Australia and many other countries, locally elected bodies would be able to borrow either from the markets or through local bond issues. The aim would be to get local services better attuned to the needs of local communities.

The right wrongly rejects the state’s role. What is needed is a different sort of state: one that empowers, not controls

Where local services are failing, communities would have the legal right to have them replaced. Community courts and restorative justice should spearhead a reinvigorated effort to deter and prevent antisocial behaviour. A new form of public ownership - community-run mutual organi sations - could take over the running of local services such as children's centres, estates and parks. And, as individual citizens, parents would get new powers to choose schools and NHS patients to choose treatments. People in old age, those with a long-term condition, families with disabled children or people in training could choose their own publicly funded budgets instead of conventionally provided services.

Progressive politics cannot stand still. It is the Conservatives' job to conserve. Labour must always be a party of change. Our own recent history tells us this is so. After we lost the 1992 election, many people thought they would never see a Labour government again. What changed was that we did. Building on the efforts of Neil Kinnock and John Smith, Tony Blair's courage in transforming his party was a first step to us winning power. We should never forget that lesson. One of new Labour's key strengths has been its preparedness to face future challenges rather than taking comfort in past achievements. Our willingness to change has forced even our most strident opponents into contemplating changes they once thought abhorrent. Now change beckons once again.

In the past decade we have made good progress as a nation in reducing poverty, improving services and creating jobs. A decade ago, those were the principal challenges we as a country faced. Today there is, of course, more to do on each of those fronts, but in addition there are new challenges to meet. In this new world the old top-down approach to governance will no longer work. It is not just that the public has reached the limits of what it will pay in taxes, although it has. People in low- and middle-income families are under pressure and feeling the pinch, so, inevitably, public spending growth in the period ahead will be lower than in the period just gone. But it is also that, just as the global credit crunch and its consequences have exposed the limits of untrammelled free markets, so the entrenched problems of social exclusion in so many communities and unfulfilled potential among so many of our citizens expose the limits of centralised state action.

What made for progress in the past will not secure progress in the future. What is now needed is an approach in which doing things with people rather than to them becomes the key to unlocking progress, whether that is improving health, fighting crime, regenerating neighbourhoods or protecting the environment.

Just as at other points in our history an old orthodoxy has been swept away by a new one, so I believe this is an idea whose time has come. In 1945, the new idea was for power to be vested in the central state and its policy expression was nationalisation. In 1979, the new idea was for power to be vested in the free market and its policy expression was privatisation. In 1997, the new idea was for power to be vested in reformed institutions and its policy expression was modernisation. Now the new idea is to vest power in the citizen and the community and to make its policy expression empowerment.

This is the new political territory. Neither the right nor the left has yet, in truth, fully come to terms with it. Whoever does so first will, I believe, win both ideologically and electorally. It really is time to make a reality of Nye Bevan's famous dictum that the purpose of getting power is to give it away.

Alan Milburn is MP for Darlington and honorary president of Progress. This is an extract from "Beyond Whitehall: a New Vision for a Progressive State", published on 18 September by Progress. Available free of charge from: http://www.progressonline.org.uk [2]