In truth the New Labour era was over some time ago. The refusal to change is the reason Labour lost. In spite of the election result there is still a progressive majority in our country to be mobilised; a majority that feels anxious and insecure, whose lives are out of control. There are new social movements and new ways of organising that offer a tantalising glimpse of radical political change. In these changed and challenging times, Compass will stand for a new hope; for the dream of a better world that is created by the people of our country.

Beginning today, Compass will commence a parallel but interlinked process of renewal. First, we will work with thousands if not millions of others to defend the most vulnerable in our country and the institutions that safeguard social progress, whenever and wherever they come under attack. Second, we will dramatically increase the pace of the project that Compass began when Labour was in government, to revitalise and provide direction for the democratic left. A progressive alliance has to be built; whether we are in government or not.

To do this effectively we must first understand the scale of defeat. In government Labour delivered important achievements that we can be proud of: the minimum wage; tax credits; Sure Start; devolution; peace in Northern Ireland and more. But there is the other list that doesn't make us feel proud at all: the invasion of Iraq; the assault on civil liberties; being relaxed about the filthy rich; deregulation of the financial sector; privatisation; tuition fees and many more. We can all make our lists and come up with a positive or negative score.

Yet this misses the key point. The Party should not expect miracles in one term or even three. We know that transforming society takes time. We look to nations like Sweden where change took decades. Politics is about pragmatism, knowing where you are going but being clever about how you get there. So the real test of Labour's time in office is this: are we stronger as a movement, as a set of ideas and an organisational force so that we have a platform from which we can be more radical in the future? The answer to that big question, sadly, is no.

The recent British Social Attitudes survey showed that support for key social democratic principles has declined: in part because Labour's leaders said equality didn't matter any more. A recent poll in the Financial Times put Labour third in terms of the party to deliver social justice! Change by stealth doesn't work. We know the Party is in a weak and perilous state, membership has more than halved and many local parties are moribund. The unions are weaker with density down to 28%. Many progressive individuals and organisations shun Labour because of its record and some voted for other parties for exactly that reason.

We must be movement builders again. But it will not be easy, especially when some are already trying to create a myth about the defeat. The myth is that the result was not actually that bad. After all, they say, Labour's core vote held up quite well; it didn't go into meltdown. Indeed Labour won back some councils. It could have been worse. Writing in The Guardian on Friday former Minister Liam Byrne said "we won on substance and lost on style" But this analysis is fatally mistaken. We have lost 5 million voters since 1997, not because of Gordon Brown's smile but because we were no longer seen by many as a progressive party at all. The election campaign represented the nadir of the project. There was no message because New Labour no longer had a vision of the world it wanted to create. All the government could say was that it would secure the recovery. There were insufficient policies that connected to people's lives because those policies contradicted the fundamental New Labour assumption; that this is a conservative country and that the needs of the economy must always come first. We lost because the classic language of the democratic left, of ‘change' and ‘hope' were stolen from us by the right. But the politics of ‘one more heave' and no compromise with 71% of the electorate would be a fatal mistake for two further reasons.

First, because, as we predicted in the report The Last Labour Government, things could get a lot worse. The Tories will try to change the boundaries and reduce the number of Labour seats by 40, they will attempt to break the funding link with the unions; support for Scottish independence could rise; and public services, the BBC and the trade unions will come under relentless attack.

Second, because of the unexpected realignment of Britain's politics it is too early to make full sense of this strange coalition that might implode quickly or may last longer. Already some of their policy agenda, like the increase in capital gains tax, are very progressive. The nature of the deal shows how desperate David Cameron was to seize power and hold on to it. By bringing in the Liberal Democrats he has dramatically marginalised the right of his party. Nick Clegg too has taken a massive gamble that he will be determined to succeed. They have co-opted the likes of Will Hutton and Frank Field. This doesn't feel like ‘the same old Tories'. It could become a hegemonic force that - like Blairism - camping out on the centre ground, denying Labour space to renew. It could leave us in the wilderness for another 18 years. Labour could be in a very deep hole.

The scale of defeat and the uncertainty that has followed it means the Labour Party now has the time to engage in the kind of programme of institutional and policy transformation that Compass has long advocated. Labour must take time to decide on who leads it, to ensure transparency and full democratic participation. But crucially to understand the nature of the question now posed to us, before we attempt an answer through a new leader. Otherwise we face the possible mistake of a William Hague and then in an even worse panic an Iain Duncan Smith. As we take time and pause for breath there should be three interlinked elements to the wholesale renewal process of Labour; the Party's philosophy, programme and organisation.

Labour's vision must be of a good society; one that is more equal, sustainable and democratic; a world in which people individually and collectively can take control of their lives. It is a world in which capitalism must be managed in the interests of society, the state transformed and democratised and civil society empowered.

A new programme must be able to turn this desirable vision into a feasible reality. As we showed in Winning on the Doorstep, there is a huge programme of ideas that are both radical and popular; polices like a living wage, the separation of banking functions, controls on high pay, a financial transaction tax and much more. The transformation to a fully sustainable low-carbon economy must be fundamental, as must the commitment to proportional representation. We must outpace the Tories and Liberal Democrats so that on every issue Labour is the most progressive force in British politics.

Finally, in terms of organisation we need a Party that knows its members are the most valuable asset it has, a Party that is fully democratic inside and open to the rest of the world outside. It is already apparent that some local Labour Parties worked like this during the campaign and reaped the electoral rewards.

Such an all encompassing review could be the most fundamental assessment of a social democratic party conducted anywhere in the world, a root and branch renewal taking at least 18 months and reaching down into the party and out to the millions of progressives in civil society and the general public. Whoever leads Labour must be bound into the process and committed to implement its recommendations.

The problem of New Labour was that it was never new enough nor Labour enough. It dropped the commitment to a more equal society but it didn't drop the old politics of command and control. New Labour died because it was essentially an elite project; run by a few and never involving or trusting the many. Now we need a party that is genuinely new and authentically Labour; new because we know lasting change only comes from below, and because there are many complex new challenges we can only face together; and Labour because only through greater equality and solidarity can the majority have the means, individually and collectively, to achieve a better life and express real freedom to control their lives.

It is Labour that needs to change, not the people.

Change comes from the desire for a radically different society. Change comes from a movement that is prepared to fight and struggle for that dream. Change comes from persevering - never ever giving up. The centre-left and social democracy is still in the hole of the failures of socialism in both the East and West that became glaring apparent in 1970s and the subsequent rise of the new right and now its own crisis. We still live in those shadows as does the new coalition Lib Con government who may be popular for some time; but they will not stop the poor getting poorer, they will not stop our planet burning and they will not revive our democracy because that only happens when people are offered a better alternative to life as it is. Nothing transformative and enduring happens quickly. We are building from a low base. But nothing changes without a new hope.