NEXT week's Labour Party conference is the most crucial since Tony Blair became Prime Minister.

A first ever by-election defeat, the struggle to secure peace in Iraq and the damaging revelations of the Hutton Inquiry have combined to leave the political fortunes of the Prime Minister at their lowest ebb.

He is not guaranteed solace from party delegates. The opinion, expressed by his close ally Alan Milburn, that the Government is losing its sense of purpose, is one widely held within the Labour Party.

That will be reflected in the defeats expected to be inflicted on the leadership at the conference.

The challenge facing Mr Blair is to overcome those defeats and re-invigorate both the party and the country with a new sense of purpose.

Mr Milburn alludes to the virtues of Margaret Thatcher's determination and strongly-held beliefs, and suggests Mr Blair can learn from her qualities.

However, there are dangers in following the Thatcher model. Seemingly peerless, she displayed an arrogance which persuaded her to introduce the poll tax against the wishes of many of her colleagues and most of the country.

Both Mr Milburn and Mr Blair will be wise to reflect that Margaret Thatcher ended her political days as an electoral liability, unceremoniously dumped out of office by her own party.

If Labour is to secure an unprecedented third successive General Election victory, then its leadership must avoid the arrogance and complacency that can infest a political party which takes the support of the electorate for granted.

If, as Mr Milburn insists, Labour's purpose is to make Britain a fairer country then Mr Blair needs to convince us he is abiding by those principles.

There remains a great deal of convincing to be done among those who think that, far from creating a fairer National Health Service, foundation hospitals will create a two-tier system.

And there remains a great deal of convincing to be done among those who think that, far from creating a fairer education system, the introduction of tuition fees will deny access to university for young people from less affluent families.

As Mrs Thatcher discovered to her cost, it is not enough for the Prime Minister to have conviction. The British public must share that conviction.