John Rentoul: I know a man who can keep the New Labour flame burning

Most members and supporters of Labour know their best hope is a change of leader

(NEIL WEBB)

If the worst happens, then what? At some point, contingency plans have to be made. For a long time, I have resisted speculation about what might happen to the Labour Party if it loses the election, because it would be a distraction from the task of trying to avert that defeat in the first place. It could still be averted; Gordon Brown could still be forced out. But it would take something big and unexpected to happen now to make the Cabinet snap out of its fatalistic stupor.

Everything is primed and ready to go. Alan Johnson, the Home Secretary, and David Miliband, the Foreign Secretary, are willing to serve – although Johnson might defer to Miliband in the leadership election that would have to be organised on the 21-day timetable set out the other day by Charles Clarke, who would also like to stand. It was disclosed this week that Miliband raised £19,000 in donations to him personally last year: enough to kick off a leadership campaign.

It looks as if that campaign will be deferred until after Labour's defeat, however. The vast majority of Labour members and supporters know that the party stands a better chance of denying the Conservatives a majority if it changes leader, but there are times when parties fail to behave rationally. Obstacles of institutions, psychology and ideology prevent them from doing so – sometimes for quite long periods, as Labour and the Tories both discovered in opposition.

And it is because of those experiences of opposition that it becomes necessary to plan for what happens after a Conservative victory. The last time Labour lost office it lapsed instantly into a fantasy world in which it very nearly destroyed itself. When the Tories lost office 13 years ago, their delusions and obsessions were not as marked, but they were almost as disabling.

In both cases, the party made what is known as the Oyster Card Error. This is the mistake that is common on the London Underground. You see people put their Oyster card on the yellow pad, the gate beeps and the sign says, "Seek Assistance". But do they? No, they try again. The same thing happens. Not once or twice but three or four times. If a party is rejected by the voters it tends not to say to itself, "I wonder where we went wrong?" but to slap its Oyster card down harder the next time in the hope that the message will get through.

So now, as we wait in the dwindling hope that a crisis will give the Cabinet the excuse it needs – in the absence of concerted courage – to knock Brown off his perch, minds must turn to what happens next.

There are three reasons for social democrats to be hopeful. They are Jon Cruddas, Tony Blair and David Miliband. First Cruddas. The MP for Dagenham is the leading figure on the thinking left of the party. He will be pivotal in deciding whether the left goes for the Oyster card option after defeat, lurching into a modern form of Bennism. Cruddas does not make the mistake of thinking that New Labour became unpopular because it failed to offer a traditional socialist alternative. As someone who has fought the BNP more vigorously than most, he knows that the politics of the modern working class are more complex than that. He also appears to be genuine in not wanting a leadership role himself, which makes his willingness to work with a Labour right-winger such as James Purnell so much more interesting.

The second reason to be hopeful is the legacy of Blair in the form of the rebranded Conservative Party. What was extraordinary about David Cameron's draft manifesto part-launch this week was not that it was utterly contradictory, but the reason for its contradiction. Cameron is struggling to become fluent in the language of equality. On Monday, he repeated the theme that won him an unexpected standing ovation at his party conference in October – a passionate attack on the Labour Government for failing to live up to its own high egalitarian ideals. Easy to mock and cavil (the idea, for example, that inequalities in health have returned to the levels of "Victorian times" is a simple misunderstanding of the data). But if the election is going to be fought over which party can make Britain a more equal society, or which party is best placed to abolish child poverty, then I'll happily put up with a five-month campaign.

If the Conservatives win, then, it will not be an immediate reverse for progressive politics. It will be a government elected on a platform of defending the NHS, creating new non-selective state schools and promoting social justice. It will take time for the cumulative choices of a Tory government to start to shift the contours of the political landscape back to the right. And it may not have that time. The disastrous state of the public finances may not be a deliberate scorched earth policy of Gordon Brown's, but its effect will be the same.

If Cameron wins, he will have to put up taxes and cut public spending. He could become unpopular quickly – and, even though he is by far the Conservatives' greatest electoral asset (hence those posters this week), there is nothing to suggest that he has much by way of reserves of public affection on which to fall back.

That is where David Miliband comes in. New Labour may have shifted the centre of gravity of British politics to the left, and forced the Tories to follow, but it has lost its way. The recession has exposed the secret that was kept hidden: that the Government has barely scratched the surface of worklessness and the dependency culture since 1997. It is time to move beyond the politics of the Blair-Brown era. The pledge to abolish child poverty turned into the Treasury throwing money at the problem; after 13 years, housing benefit is an unreformed £20bn-a-year colossus of perverse incentives, dead weight and inefficient allocation of housing and labour.

The Tories may have some good ideas about reforming welfare, but it will be between hard and impossible for them to do much about it while trying to balance the nation's books. If Labour keeps its head, it may be able to renew itself in a shorter time than it took after 1979, but it needs the kind of leader that can find different and better ways of achieving its goals.

After an election defeat, the leadership must pass to a new generation. Alan Johnson will turn 60 a few days after a 6 May election; Harriet Harman will do so two months later; Jack Straw is already 63. Of the younger generation, Ed Balls is too closely identified with Brown. The candidate best placed to challenge David for the leadership is his younger brother Ed, the Climate Change Secretary. He is a plausible communicator, but that is not enough. His elder brother made the climate-change brief for him, showing creativity and decisive thinking ahead; now he has the international experience too.

All too often in Labour politics, what should happen and what is likely to happen are two different things. But, by a happy congruence, the leader of the Labour Party after the next election both should be and probably will be David Miliband.

John Rentoul is chief political commentator for 'The Independent on Sunday'. He blogs at independent.co.uk/eagleeye

j.rentoul@independent.co.uk