A mixture of bad luck (the lost child benefit discs), poor judgment (the election that never was) and inexplicable stupidity (party staff failing to properly declare donations) has seen Labour buffeted by events ever since a hubristic Autumn conference. Still, the opposition's lead in the polls is much closer to those achieved by Neil Kinnock in 1986 and 1991 than those of Tony Blair before 1997.

This is the first time since 1992 that who will govern is again an open question. That is not just a threat to Gordon Brown – it could be his opportunity too.

Britain's political cycle has been in a state of suspended animation for fifteen years, ever since the ERM crisis destroyed the Tory reputation for competence. Blair and Brown took full advantage, combining a strong economy with record investment in public services, while the Conservatives showed no interest in learning the lessons of defeat.

By 2005, Labour had lost popularity but were saved because Michael Howard proved the Conservatives had not changed. We had the strange spectacle of the governing party spending millions in the campaign trying to persuade sceptical voters that their opponents could win.

This time, the possibility of a Conservative government is very real. David Cameron will face, as he has not to date, the scrutiny a would-be Prime Minister should expect. His fragile truce with party traditionalists will come under pressure, especially over Europe and Cameron's tactical decision to sign up to Labour's spending plans.

Gordon Brown's task is to show that he can regain the initiative and make the political weather. Rather than seeking to rise, as Prime Minister, above party politics, he needs to lead a government and party which thinks politically, making a public case as to what a Labour government would do which a Conservative government would not.

So what should a Brown fightback involve?

Firstly, a period of calm to restore stability is needed. A twelve year old government can not win on competence alone. But it is an essential foundation.

Secondly, party funding reform and an elected second chamber are now essential for a clean break. That nobody was charged in cash for honours should not have been taken as a signal to carry on as before. Labour introduced laws to make funding transparent. But transparency has exposed the lack of public legitimacy of how we fund British politics. Breaking the rules that Labour introduced, by accepting proxy donations, was unforgiveable.

Union funding did not get Labour into this mess. But Labour has now lost the public legitimacy to oppose an overall cap applying to union funding as part of a reform deal. Instead, we now should take this opportunity to strengthen union engagement and Labour membership - mobilising individual union levy payers as full participants in party democracy.

While state funding is necessary, it will be more difficult to win public support. It should be up to individual voters to direct public funds to any party, or none. Public funds should support for political education and engagement, not election posters. Overall limits in expenditure will be essential, to contain the influence of money in politics.

But Brown's main challenge is to set out the positive argument for 'change' which can rebuild his electoral coalition. Over the next two years, broad progressive opinion in Britain will be deciding whether it has a significant stake in re-electing a Labour government or not.

It is a question which can be answered by a powerful progressive manifesto. At the heart of this should be concrete action on ending child poverty and narrowing the gap in education alongside a new democracy settlement, including a written constitution and Lords reform.

If opposition politicians and commentators want to make Gordon Brown the underdog in this election, they could be making a dangerous mistake. But perhaps, like Harry Truman before the 1948 US election, Brown should relish the mantle. That could be precisely the way to make the political fightback that Labour needs.

• This editorial commentary appears in the Fabian Review new year issue, published 3rd January 2008.

• All Fabian members receive the Fabian Review free as part of their membership.

•  

Fabian Review, like all publications of the Fabian Society, represents not the collective view of the Society, but only the views of the individual writers. The responsibility of the Society is limited to approving its publications as worthy of consideration within the Labour movement.