Alan Milburn said that the Government needed this fresh mandate if it was to create a lasting — or “irreversible” — legacy for Britain’s public services in the same way that Margaret Thatcher “embedded the free market” during the 1980s.

His speech in Manchester yesterday will be seen as a riposte to those, including some Cabinet colleagues, who are uneasy about Tony Blair’s stated desire for an “unremittingly new Labour” manifesto in the coming election.

Mr Milburn has clashed in recent weeks with John Prescott, the Deputy Prime Minister, about housing policy, while his relationship with Gordon Brown, the Chancellor, has not recovered from a dispute over foundation hospitals when he was Health Secretary.

Yesterday, Labour’s election co-ordinator went out of his way to praise the Chancellor’s management of the economy, as well as Mr Prescott’s willingness to embrace reforms giving communities a bigger stake in decisions which affect them.

But he said: “The true test of politics is whether you make the changes that endure. As we move towards the next election, the nation will need to decide: does Britain keep moving fowards or does it go back?”

Mr Milburn said that the Government, having increased resources for health and education, should now seek a “new public service settlement in which choice for users and diversity of providers becomes the modern means of redistributing opportunities in our society”.

His emphasis on “choice” and “diversity” once again threatens to put him at odds with Mr Brown, who believes that the private sector and markets have a limited role to play in future public service reform.

Mr Milburn said: “Making more opportunity available to those currently denied it means state monopoly giving way to greater diversity. Not, as some crudely claim, a latter-day drive for privatisation.”

He said that the private sector already dominated social care provision while, by getting a “foot in the door” in education, health and local authority services, it had helped to improve standards. Tenant-owned housing schemes and foundation hospitals were allowing people more control over the way that services were delivered. This “active citizenship”, Mr Milburn said, would be “the centrepiece of the progressive political agenda” in the years ahead.

Mr Prescott will publish plans to reform local government within the next fortnight on which he has reached broad agreement with Mr Milburn and other modernisers. These proposals are expected to set out ways in which community and voluntary sector groups can take over responsibility for running services such as leisure centres or parks, as well as tackling nuisance crime.

There are concerns that apathy among Labour voters as well as antipathy towards the Government over Iraq within sections of the electorate, could yet wreck hopes of a third landslide. This week Labour’s high command sought to dismiss reports that the Tories are privately expecting defeat in the election. Indeed, there are worries that Michael Howard’s immigration policies may yet find “empathy” with sections of Labour’s urban base.