Labour has alienated many of the key supporters who brought it to power in 1997, says former Home Secretary Charles Clarke.
Mr Clarke was replaced as home secretary by John Reid in May
Writing in the New Statesman, Mr Clarke points to five fault lines which Labour must tackle to stop the Tories being seen as an attractive alternative.
He also warns the party against a return to the infighting which brought it to its "lowest point" in the 1980s.
The government must also promote its successes better, argues Mr Clarke.
Mr Clarke left the Cabinet earlier this year after being sacked as home secretary.
He says Labour must "face its demons", not through leadership contests but by looking at its overall direction.
He claims the problems caused by reform have led to a loss of confidence among significant numbers of government staff and consumers in certain areas.
Some of this is due to hostility from vested interests, he argues.
"But in rather more cases, it stems from an approach that has alienated too many, including sometimes even the most active supporters of reform," he says.
Mr Clarke points to five fault lines for Labour:
- Failure to reach a deal with local councils on the division of local and central responsibilities, putting "a distance" between ministers and councillors and others
- Concerns among the business world, much of which swung behind Labour in 1997, about regulation, tax, value for money in public services and failure to adopt the euro
- Lack of confidence among environmental campaigners in the party's commitment to green issues
- Doubts about the party's determination to complete constitutional reforms, such as changes to the House of Lords, and fears for civil liberties amid anti-terrorism legislation
- The government's approach to Iraq, Afghanistan and the Middle East "has alienated many".
Mr Clarke also criticised Labour's decision-making over the next generation of nuclear power plans and the decision to replace the Trident nuclear weapons system.
In a side-swipe at the way Tony Blair and Gordon Brown have addressed the two issues, he says: "They cannot simply be dealt with as an aside at the CBI's annual dinner or a half-sentence at the Guildhall."
Mr Clarke says "clear and unambiguous leadership" is needed to tackle difficult issues in a way which heals divisions rather than aggravates them.
"Failure to undergo the systematic assessment I have discussed raises the real risk that our opponents will be able to present themselves as an attractive alternative at the next general election - and even before," he adds.
The party conference season will be dominated by talk of when Mr Blair intends to step down as prime minister.
Former Defence Minister Don Touhig said Labour's prospects have been damaged by Mr Blair giving himself a "sell-by date" and saying he will leave before the next election.
Dr Howard Stoate, the Labour MP for Dartford in Kent with a majority of just 706, said: "I am beginning to come round to the view that we do need a firm timetable because we can't go on with endless speculation."
He added: "I don't want to see the [party] conference endlessly speculating about who is going to take over from Tony when he decides to go."
Last weekend, Culture Secretary Tessa Jowell said the speculation over Mr Blair's plans to step down was creating "uncertainty" within the party.
But Lord Chancellor Lord Falconer said it was not the right time for the party to be talking about a change of leader.