THE LAST harrumph sounds; the Long Sulk is ended. No longer does the portly elder statesman inveigh at the ruinous influence of his party leader. This week Lord Hattersley declared of his ideological nemesis: “It would be stupid . . . not to acknowledge that the Prime Minister has just completed the two most impressive weeks of his political career.”

So it would. Tony Blair’s diligence over the Olympics, his chairmanship of the G8 and his composure in responding to terrorism have been the stuff of leadership. Yet Lord Hattersley remains unreconciled. He insists that “the Britain that Blair wants to build has very little in common with the social democratic vision of a good society”, and believes it “self-evident that the Labour Party should be led by someone who is Labour”.

His thesis is not self-evident at all. It is an artifice for appropriating the word “Labour” for an impossibly narrow constituency: those who share Lord Hattersley’s conviction that nothing has refuted the old Croslandite programme of public spending and egalitarian redistribution. If anything is self-evident, it is that Labour should be led by someone who recognises the failures of the governments in which Hattersley served and who is resolved not to repeat the experience.

Under the last old Labour government, public spending peaked at almost 50 per cent of GDP, and marginal tax rates rose to levels that damaged incentives. Trade unions held economic power while being essentially answerable to no one. Jim Callaghan acknowledged that the option of boosting spending to stimulate employment no longer existed, and had “only worked by injecting a bigger dose of inflation into the system”.

But it took Labour many years to come to terms with the realisation that governments as well as markets fail, the need to subject the trade unions to the rule of law, and the limits of discretionary fiscal policy.

In that time Labour might have argued that deregulation and defeating union militancy had been necessary, but that the concept of public service had been overlooked; that the market is the only reasonably efficient economic producer, but that it depends for its legitimacy on the State easing the social consequences of economic change. The last thing it needed was a tested and failed programme for big government. The last thing it needs now is the advice of Lord Hattersley.