Its dilemma is shared by every centre-left government in Europe, Alan Milburn, the former Health Secretary, said in an article for The Wall Street Journal.

Mr Milburn, who remains close to Tony Blair and the planning for Labour’s election manifesto, said that the party must now take the “territory of consumer choice” from the Conservatives. His message will be viewed by many in the Labour Party as moving it too far away from its traditional roots by encouraging more market forces and private sector provision in public services.

But Mr Milburn wrote: “Traditionally the Left turned its back on choice as the preserve of the Right. In a consumer society where choice is king, vacating this political terrain is not a feasible strategy for modern progressive politics.”

He added: “Those who say there are limits to the role of the free market are right. But we should be as explicit in recognising there are limits to the role of centralised states.

“The challenge over this decade is to move power irrevocably outwards and downwards, to those using public services and the communities who rely upon them.”

Mr Milburn added: “Today new Labour, like the rest of the progressive centre-left in Europe, is at a crossroads. One way lies a road of retreat — the top-down paternalistic statism of the last century. The other is the road to progress — bottom-up and empowering, in tune with the needs of the century.”

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