But paradoxically Labour including their supporters are almost washing their hands of this period, brandishing it as almost a Tory lite government. If Labour continued on that path (+ learning from the mistakes) then they would eat into the more centre ground Tory voters that are more compassionate in nature but do not trust Labour with the economy. This would give the party a much better chance during an election unless the supporters of Labour as it stands at the moment vote for something else.
Yes I agree entirely with that. I am certainly someone who is more sympathetic to the overall New Labour domestic project. You could also argue the Atlee governments proposals oversaw a boom of around 25 years and an adoption of their principles across the house.
The difficulty of the above narrative is that this Labour government in essence are occupying the space vacated by New Labour (if anything they may be slightly to their right) on domestic policy. The issue is politics has moved so far to the right that it looks extremely radical to say as much. The internal debate amongst Blair supporters seems to be between those who believe objectively they had they had the right policies in the 00's and those who want to maintain the principle that you locate yourselves at the centre of politics to win (or in reality just to the left of the Conservatives). Those two things now look increasingly different to one another.
I'd also add into this, what is killing Labour is that it's MP's do not want Corbyn to win. I can think of no political party that has ever got close to power (certainly as close as Labour are) with a majority of it's MP's in open opposition, For the most part I believe this to be for self-serving reasons. It creates a dilemma for the leadership though as to how exactly you tackle this. Electorally there is no easy option.
However even when Corbyn has moderated (his support for Palestine, Trident etc etc) it has not stopped the MP's internally damaging the party, if anything it has greatly increased it and given them oxygen/confidence.
In the medium term it's hard to see it ending well for Labour. I only speak for myself, but the day Corbyn goes (and eventually they will get him, because nobody can successfully lead a party where such insolence exists) will be the day I stop voting for them. The majority of those MPs are an absolute shower and I'd vote for most other parties ahead of them. In many ways I have more respect for even Tory MP's than them, as at least they are broadly principle to a cause rather than themselves. I do think lots of people will join me in this as well. They will herald getting rid of Corbyn as their re-birth, but it will be their downfall.