Tony Giddens: There is no alternative - the Third Way is the only way forward

It has become commonplace in parts of the press to say that New Labour is all soundbite and no substance, that it has lost touch with its social-democratic roots and has abandoned the traditional left-wing concerns with redistribution and a fairer society. Not long ago, for example, the journalist John Lloyd had the temerity to write that "this has been the best Labour Government of the past half-century". He was lambasted for his pains (as he must have known would happen) not from the right, but from the left. The response was entirely predictable and is based on a fundamental misunderstanding of what New Labour and the Third Way are about.

From what is written in Britain one would get no sense that the wider New Labour agenda, the Third Way, is a worldwide phenomenon or that almost all centre-left parties, including even the pioneering Swedish social democrats, have restructured their doctrines in response to it.

Today's critics of the Third Way seem to have blanked out the past. After all, Labour, by the opening of the 1990s, had lost three elections in a row. Many people act almost as if the attempt to develop new thinking had never happened at all, as if Labour could somehow go back to the very policies that had kept the party out of power for so long. Reversing the years of social-democratic decline was a painful and difficult business. The ideological and policy-making gains that were made then should not be forgotten but built upon. We need to continue to go forward from them, not try to go back to the future.

Intellectual laziness in this debate consists of substituting easy assertion for hard analysis. Roy Hattersley, reborn as the scourge of New Labour, recently declared that Labour "is no longer my party" since "Tony Blair's dream of a meritocratic Britain is not the dream of a true social democrat". Equality of opportunity should not have prime place in the social-democratic lexicon, which must favour large-scale redistribution. Moreover, New Labour, it is said, has substituted an anodyne term, "social exclusion", for what the left should really be concerned about, which is poverty.

Now, the redistribution of income, wealth and life chances should remain a core part of what Labour stands for. But it is foolish to suppose that we can ignore the difficult trade-offs that we face when tackling inequality.

A focus upon social exclusion has nothing to do with trying to sweep poverty under the carpet. Social exclusion is not just about poverty, but about living in neighbourhoods that are crime-ridden and lack access to shops, transport, decent schooling and job opportunities. Many of the excluded are, to some degree, casualties of the welfare state itself, caught up in a negative spiral of dependency.

Political surveys in this country and elsewhere show that the ideological changes made by social democratic parties – in Britain, the shift from old to New Labour – were crucially important in persuading key categories to switch their vote. But centre-left parties will have to continue thinking tactically as well as sharpening up their ideas and policies. The majority of voters in Western democracies are now politically de-aligned – they have no clear and continuing commitment to any party.

The new social democracy seeks to preserve the basic values of the left – a belief in an inclusive society, a commitment to combating inequality and protecting the vulnerable – but it holds that many traditional perspectives have become counter-productive.

For example, the public interest is often best served where the state collaborates with other agencies, including non-profit organisations, business and third-sector groups. Structural reform of the public services is required to make them more effective and more responsive to citizens' needs. Tax and spend for leftist parties in the past meant tax and overspend. Left-of-centre parties habitually entered into spending commitments they couldn't afford and sometimes ran up massive state debts in the process.

It won't do to think of taxation only in relation to social justice. Tax policies almost always have consequences for economic behaviour and for competitiveness. Heavy-handed government intervention is a thing of the past. Welfare reforms must stress responsibilities as well as rights in order to encourage active citizenship as well as to reduce welfare dependency. Policies such as Labour's New Deal are an example of how this can be translated into policy.

We must recognise the limited electoral support that can be gained for direct redistribution of income to the poor. To repeat, social exclusion is not just one form of poverty. There is no point simply transferring income to someone who cannot read the instructions on a medicine bottle or has a chronic drugs problem. The best protection against poverty is holding a good job, and new social democrats rightly place a strong emphasis on work. We can say with some confidence that no feasible alternative model to the Third Way exists, at least for now. We should be debating the limits and possibilities of this framework rather than pretending a more "authentic" one can be found.

I do not mean to say that Labour should never consider raising tax rates but that analysis of such issues must bear in mind the need to reconcile social justice with a competitive economy. One could say that the two old political philosophies – the old left and Thatcherism – were "half theories". Old Labour was strong on social justice but never successful in fostering a dynamic economy. Thatcherism was strong on competitiveness but took no account of social justice. The Third Way seeks to reconcile these two, recognising the difficult trade-offs that have to be confronted.

Sadly though, the Groucho Marx tendency is alive and well among some of the critics of New Labour. Groucho declared that he wouldn't want to join any club that would have him as a member. The Groucho Marx tendency in politics is the view that anything that can actually be achieved in the sphere of orthodox democratic politics can't, by definition, be worthwhile and should therefore be either scorned or ignored. Many on the left have always thought they know better than citizens what is good for them – hence their authoritarian traits.

The new social democracy, the Third Way, concentrates upon the conditions necessary to achieve electoral success. This does not imply rejecting idealism. It means addressing voters' real concerns rather than opting for an impotent ideological purity.

The writer is director of the London School of Economics and author of 'Where Now for New Labour?' published by the Fabian Society, Policy Network and Polity Press