The crucial votes which will decide who will be the next British Labour Party leader started being cast today. Those casting their votes include Labour MPs and MEPs, party members, British trade union and socialist organisations. The process will last until September 22 and the new leader will be announced and be ready to take the helm three days later during the Labour Party annual conference to be convened in Manchester.

The rise and fall of Tony Blair’s New Labour, which swept to power in 1997 with a landslide victory and remained popular until the Iraq war, is a fascinating story. Three months ago, its fall from grace was completed when the party won just 29 per cent against David Cameron’s Conservatives and Mr Blair’s successor and long-time rival, Gordon Brown, resigned.

Labour’s leadership contest has five candidates; four men and one woman: David and brother Ed Miliband, Any Burnham, Ed Balls and Diane Abbott. All Oxbridge educated but from diverse family backgrounds.

One thing is for sure; after being elected in 1994, Mr Blair turned Labour into an election winning machine, securing landslide victories in 1997 and 2001 and being elected comfortably in 2005. He commanded the centre ground of British politics, successfully wooed business leaders (although most of the middle classes continued to back the Tories even in 1997) and acquired astonishingly high popularity ratings – touching 80 per cent at several times in his Premiership.

Politically, he persuaded his party to abandon some of its most sacred political symbols, for example, by replacing Labour’s commitment in the party constitution to “nationalisation” of industry with a more vaguely worded commitment to re-distributing wealth and political power. After 18 years in opposition, Labour supporters were prepared to do whatever it took to get back into power.

His electoral success consigned the traditionally dominant Conservatives to the political wilderness. The Tories tried three right-wing leaders – William Hague, Iain Duncan Smith and Michael Howard – all of whom were equally unpopular before they decided to elect the self-proclaimed “heir to Blair”, Mr Cameron, in 2005. In opposition, Mr Cameron then managed to straddle the demands of his right-wing party membership with the promise that moving towards the centre would secure power, although, unlike Mr Blair, he did not secure a majority despite facing an unpopular government. This failure may return to haunt him.

But the problem for New Labour was that, while building up middle-class support and casting their net as wide as possible, they neglected their traditional working-class base of supporters and the trade union movement that has always provided most of the party’s financial support. Indeed, it is striking that Labour did not lose the May election because they failed to win the votes of the professional middle classes but because their traditional supporters either defected to the Conservatives or to the Liberals or did not vote at all.

The demographic breakdown is striking. Labour lost two per cent of the middle classes but nearly 10 per cent of the working-class vote. They had lost touch with their core voters.

They also lost thousands of members as party activists became disconnected from the central party machine and worried that the Blair and Brown governments had become too centrist and detached from the views of party members. Having had 400,000 members in 1997, Labour had an estimated 180,000 by the 2010 elections with the consequence that many constituencies and local parties did not have enough members to campaign effectively on the ground.

So who will Labour’s next leader be and how do they plan to re-claim power?

All opinion polls so far suggest that the next leader will have the surname Miliband. Whether it will be former Foreign Secretary David Miliband or his younger brother and former Environment Secretary, Ed Miliband is too close to call.

David has more backing from MPs while Ed has the backing of Britain’s three largest trade unions. Like the other three candidates, the Milibands have campaigned on a more left-wing ticket than Mr Blair and Mr Brown. Both have spoken about increasing taxes on the financial sector and the wealthiest in society and about making Britain’s economy less reliant on the City of London. Like all candidates, they are vigorously opposing the public spending cuts and VAT rise proposed by the Conservative-Liberal coalition.

It may be that they are tacking to the left in order to win the leadership and will then metamorphose towards the centre. However, the coalition is already unpopular and is likely to get more so as the cuts start to take effect. Moreover, public anger about bankers’ bonuses and the power of the City remains as high as it was during the worst times of the financial crisis. It is quite possible that Labour could be back in power sooner rather than later.

One of the greatest successes of Mr Blair is that his three straight election victories have given Labour activists and politicians the mentality that their party is not an opposition movement but a natural party of government; the same mentality that the Conservatives had for most of the 20th century. In the three months since their worst defeat since 1983, Labour has gained 30,000 new members, hardly the sign of a party in terminal decline.

But the rise, fall and potential re-birth of the Labour Party is a lesson to all political parties. The balance between reaching out to new supporters while maintaining your traditional ones is fine indeed. A party needs both to win power and then stay in office.

The Times – Monday, 16th August 2010