James Purnell: New Labour is not dead and buried – it's in rude health

The credit crunch’s biggest effect may be to rebalance the political spectrum

When times are tough, everybody needs to make difficult decisions. For individuals, it's about what we prioritise.

For the Government, it is no different. As we face up to the financial crisis, the Government has a choice to make: do we consolidate what we now have or do we set out a bold agenda to make radical change. This week, Labour will set out its legislative programme for the year, and increase the pace of reform.

Our public spending plans are based on achieving £35bn of efficiencies. At the same time, the public want to see better school results, better health and more people getting back in to work. We will accelerate public service reform so we can ensure that services can get better and more efficient at the same time.

So, in welfare, we will go further, faster. Some people say we should be slowing down because of the economic downturn. I passionately believe we should be doing the opposite.

Our support works. It changes the lives of lone parents, of the unemployed, of people with disabilities. It's because it works that we want more people to take it up.

And if it is harder for people to find work, then we should increase the support, not roll back the obligations. To do anything else would be to repeat the Tory mistakes of the Eighties and Nineties when the unemployment figures were fiddled and millions were shuffled on to incapacity benefit and trapped there, scarring communities for generations.

Since 1997, we have made it clear that people need to look for work, and in return provided support through the New Deal. Future reform will ensure that virtually everyone has a clear obligation to look for work, or prepare for work. This matters now more than ever.

Those who have recently speculated on the death of New Labour are in for something of a shock: New Labour is in rude health, as these changes show.

The basic idea of New Labour was that the party had been held back by our tendency to let once sensible policy positions become unquestionable and unending ideological commitments. The central insight was the same as Crosland's – that the Labour Party had always got means and ends mixed up. Too often, the Labour Party had made a fetish of state action when the means should have been whatever it took to get the ends achieved.

In a time of crisis, what it takes is a public stake in banks and a sharing of the tax burden. That's not the death of New Labour, it's a pragmatic response to a crisis. It's using the power of government to make markets work again.

It is a bold decision. There are political risks. But it is Cameron's Tories who have really bet the house. They have closed their eyes, averted their gaze, crossed their fingers and hoped that the economy doesn't get better. That's a strange wish to have – to hope that the fiscal stimulus doesn't work.

In truth, the real death this week was not of New Labour but of Tory New Labour posturing. Their modernisation has been exposed as a spray job. This week has shown that they are sceptical, as a matter of faith, that government can do much to support the economy. They have ended up in a traditional place: opposed to extra spending but with no constructive suggestion about what government should do.

As an opposition they have been left doing politics on a reflex. And when asked what they would do instead, they have been dumfounded. And it is this, the complete absence of any notion of what the Conservative party is for, not the financial crisis, that has left them looking out of their depth. The path out of recession, and the decade that follows, will be defined by the calls that politicians make today.

Over time, the credit crunch's biggest political effect may be to rebalance the political spectrum – to underline the argument that we should be ideological about ends, but not about means. That, combined with the Democrats' victory in America, puts a turbo-booster under progressive politics.

The next Election will be won by those who can inspire voters with their vision of how Britain can change – of how our country can be better. But when, like Cameron and Osborne, you are apathetic about the role of politics to make a difference, then your message inevitably ends up being, "no we can't".

In contrast, Gordon Brown has proven that we truly are at our best when at our boldest. Once today's turbulent times have become yesterday's news, we need to show that we can be just as bold about the future as we have been in a crisis. That boldness will grow from renewing New Labour, not burying it.

The writer is the Secretary of State for Work and Pensions