I have been reluctant to comment on the Hain 'donations' case because I might be seen as having an axe to grind. Well, I suppose I do. Back in the mid-1990s, the debate over the modernisation of the Labour Party was a much more complex affair than the public was led to believe.

In the end, the rising New Labour faction (effectively a renaissance of the Old Labour Right) captured the 'commanding heights' of the old Labour Party and cut a deal with the trades unions at the 1996 Party Conference that has guided its fortunes for good or ill since then.

That deal is now encapsulated in the so-called Warwick Agreement, but it might be better interpreted in terms that gave one faction of the political wing of the Labour Movement total control over policy and (eventually) over Government. It got trades union acquiescence in return for acceptance of a 'progressive agenda' on employment rights and related issues.

We know (not believe) that Tony Blair had no intrinsic interest in this trades union agenda either then or since. The threat of grassroots pressure at the 1996 Conference, from those who had developed an alternative model of party modernisation, enabled the trades unions representatives on the National Executive Committee [NEC] to force through their agenda,

Subsequently and unceremoniously, the trades unions 'dumped' the grassroots whose only victory from that week in Brighton was the new possibility of electing up to six members to an NEC that was now largely irrelevant, whether to the monitoring of process or the development of policy within the Party.

I remember all this because I was co-ordinator of the grassroots revolt. The Grassroots Alliance had been involved in occasional and often desultory negotiations with union political officers throughout the previous year. 

The movement that I represented had a vision of total reformation of the Party along more democratic lines than New Labour, one in which modernisation meant direct engagement with the people, including new 'classes' like the self-employed and even very small business. But we lost and that should have been an end of it.

The democratic movement subsequently captured approximately half the elective seats on the NEC at each election but it degenerated because a centralised command party provided no levers for any serious dialogue or influence. Party members began to drift away as Tony Blair engaged in a programme of work that can only be described as conservative but with progressive characteristics.

The trades unions soon dropped all pretensions to ideology or a concern with the community outside their membership and they became what they were a hundred years before, a special interest group with a policy agenda that they partly paid for through votes and funds.

The new Government would certainly court the trades unions as source of funds and to assist in very occasional internal votes but the programme of work demanded by the trades unions was implemented reluctantly. Trades union leaders were periodically forced to press the matter. 

The Government has constantly demurred on anything that hurt 'competitiveness' and the relationship between the two has become ever more introvert, critical, pragmatic and detached from the world outside.

Peter Hain, now Minister for Work and Pensions (key to the trades union interest) and at the centre of the latest of a succession of 'scandals', was a critical factor in the 'turn'. He represents several competing strands that all play an important part in the New Labour phenomenon. 

First, he was initially a liberal from overseas with a strong anti-apartheid agenda. He brought the primacy of human rights, racial equality and a concern for Africa into the heart of the New Labour project. In this, he was in tune with popular sentiment within the Party.

Second, he was not Welsh but held a Welsh seat. So, his liberal-progressive (not really traditional socialist) agenda was associated with the soft left 'faction' surrounding former Leader Neil Kinnock. Kinnock had been John the Baptist to Blair's Christ in the demand for a more centralised modernisation and for a progressive and internationalist agenda.

Finally, he was close to the then-powerful GMB union of John Edmonds, perhaps the least in control of his union of all the union leaders of the mid-1990s but the one most prepared to engage with metropolitan liberal society and one who did his best to promote 'ideas'.  In his case, the 'big idea' was the soft left agenda of full employment.

The 'faction' in the PLP that Hain was belonged to at that time and which he partly-led was called by the uninspiring title of What's Left. The name was a residue of bitter battles with the 'Hard Left' represented by the Campaign Group of MPs. What's Left was a loose group, held together more by its enmity with those to its Left than with any real fervour to challenge the Right.

The typical MP in the old federal party would always believe that the grassroots was there to serve his or his faction's agenda. This had always been true in the past, but the 'new' grassroots movement was different.

Led from the 'right' but with a membership that tended strongly to the 'left' (there was a similar Tory democratic movement emerging at the time), the grassroots movement originally associated itself with the GMB and with What's Left, but it was Hain who ended that alliance, albeit unintentionally, in the months before the 1996 Party Conference.

Famously (within the grassroots movement), he tried to command and control the movement by giving it orders instead of consulting with it. This rather defeated the purpose of an independent democratic grassroots movement.  

The Grassroots Alliance (its official shorthand title) soon ceased attending meetings of the What's Left Parliamentary Group and even sent an observer (no more) to the Campaign Group. Similarly, the talks between the unions and the grassroots movement in 1995 had already proved to be an attempt by the trades unions to control the latter without giving anything in return. 

Ironically, it was the 'right' of the grassroots movement that demurred on an alliance. The 'left' representatives (today largely, though not exclusively, associated with the Livingstone administration in London) were rolling on the floor like puppy dogs at the thought of switching the unions to their side (no doubt when snowballs had started to form in hell).

Finally, at the Party Conference in 1996, it was Peter Hain who got up on the rostrum, as the new proposals to modernise the party were presented, and who asked the assembled delegates to 'trust us'. 

Apart from the natural reaction of any sensible person in politics that you should never take anything on trust unless you hold some sword over the head of the person proposing it, this was the signal that the trades union block vote would remove serious party democracy and engagement with the community from the agenda.

A significant union-backed soft Left vote within the PLP would now enter into the New Labour coalition as junior partners.

To be fair, when challenged by me on this strategy - which not only involved accepting a command-and-control approach to the Party but was to involve collective responsibility in every policy promoted by New Labour in the subsequent decade - Hain said with passion: "I am fed up with drawing lines in the sand that I then have to cross."

This was a reference (or so we took it) to a natural frustration that the Labour Left would make unsustainable policy demands, be faced off and then have to retreat on fundamentals. Of course, he was right in his analysis of the conduct of the British Left, one of the most self-destructive political movements of modern times, but our argument was a different one.

To my people, it was a matter of drawing the right lines and then not having to cross them.  This meant accepting the need for modernisation and democracy and giving primacy to process rather than policy in order that good progressive policy should be made.

While the grassroots movement was as complex and diverse as any other (it still survives for the sole purpose of electing members to the NEC), the inner organising core were surprisingly united on a few propositions that have since become the chickens that came home to roost - and, yes, I am moving towards my punch line about Mr. Hain.

First, that modernisation was not just modernisation of policy (as New Labour promoted matters under the influence of its neo-Marxist element) but modernisation of the political process, certainly of the party itself and probably of the national political process. 

In this sense, the inspiration was modernisation along European socialist lines, only more democratic, and with acceptance that the Liberal Democrats could be plundered for some of their ideas on process rather than 'allied with' (the talk of the time). Democracy was more than proportional representation and the list system.

Second, that Labour should be a truly national party of the centre-left and start to move away from special interests. It should dedicate itself to the interest of the mass of the population but especially of its weakest and most dsiadvantaged members (and this would mark it out from the 'selfish' centre-right).

From this point of view, trades unions' suspicion of the movement was well advised because it might have placed as much pressure on it from the 'left' as New Labour was to do from the 'right'.  The difference was that union members (rather than the political officers) would be partners in the process of national transformation.

Finally, that Labour should be best practice in terms of transparency and internal rule of law. Labour both before and under New Labour has been marked by secrecy, patronage and corporatism. The desire for power had already created a 'culture of spin' that would win elections in the short run but we believed that it would degrade the Party in the long run - which it did.

The result, we knew, was a Party that was administratively second rate to the point of incompetence, whose bowels hid secrets regarding undue influence that would drag the centre-left in the mud and whose rhetoric, exciting in the early years, would create not a healthy scepticism but an unhealthy cynicism.

And this brings us back to Mr. Hain, who had been so central to the decision that split centre-left unity on democratic reform and who has maintained, with others, centre-left cover for Blair through thick and thin, through war and now economic crisis. 

Since the Iraq War, he has lost all but the 'Kinnockite' rump of the soft Left. Significant moderate figures like Peter Kilfoyle have led the charge against the engagement in Iraq. His Deputy Leadership pitch, for all the £100,000 in his pot, was a folie de grandeur.

But, oddly, although this might seem to 'damn with faint praise', if we think he was mistaken, then he was honestly mistaken. Mr. Hain (in our view) may be inordinately ambitious but he has been ambitious out of a past desperation to do things that he sincerely believes are 'good'. He is an honest man which makes what is happening to him genuinely tragic.

He made a judgement a long time ago that 'good things' could only be done through joining a command-and-control administration with real power over the state (on which he had a point), but he failed to understand that the 'wisdom of crowds' (over issues of peace and war in particular) in a democracy is not a moral point so much as a practical one. 

When the public, mediated through a genuinely free and independent system of representative government (in which parties have a role), make their fears and desires known, the wise politician does not force through his agenda through the use of naked power but works to persuade and manage opinion by reflecting back the public's own interest.

More of that political philosophy on another occasion. 

The criticism of Hain the politician (not the man) may be that, in 1996, he told us to 'trust him' and 'us' (the party elite) and the trust has been betrayed. However, there is a larger charge. 

Back in the mid-1990s, the reformers (and since then, their representatives on the NEC) knew that administrative competence was an issue, partly because it was cover for political manipulation of genuine debate and criticism and partly because it was used to permit flows of funds, unchecked, into the personal hands of those who should have served party and people and not their own, their faction's or the State's interest.

We have an NEC that was denied vital information, a Treasurer (a solid and reliable trades unionist) who appears to have been kept in the dark and now a senior Minister, Mr. Hain, who thinks that lack of administrative competence in dealing with an important matter of democratic process is justified by his prior duties as an agent of the State.

In other words, although deeply apologetic, we have a politician whose 'mentality' is that of all of his kind within New Labour - that processes designed to preserve democracy, the rules on which our democracy is based, are secondary to the business of exercising power. He is not alone. It is a habit of mind. He has just been caught out.

But the saddest aspect of the whole case is the reaction of the Prime Minister.  His first reaction should have been decisive and based on the essential morality of the situation. 

He should have asked Mr. Hain to resign because of a breach of process 'pour encourager les autres', even if we all understood that, later, he might, once all inquiries had concluded, be reinvited back into government - assuming it was a genuine error and not something worse.

But no, Mr. Brown is as deeply implicated in a culture of 'busking' through issues of process as the rest of his New Labour machinery. His first instinct seems to have been to wonder what all the fuss was about and then put the mayhem down to political manipulation from the Tories.

In short, Labour solidarity for the sake of power is now writ so large that the 'club' thinks it can pull in its horns and wait for the storm to pass.

This morning, we have seen (it would seem) a volte face. Gordon Brown now criticises Hain's "incompetence" as if it was a crisis of one man when the whole system, over which he, as co-conspirator in the New Labour coup and then as Party Leader, presided directly or indirectly for over a decade, has been run incompetently.

Poor Mr. Hain lacks judgement. He should have taken process seriously. He should have resigned immediately. 

But Mr. Hain does not deserve to be scapegoated by an Administration whose hall-mark in terms of the conduct of its own Party is shockingly lax and whose attitude to process is, in general, cavalier - except, of course, when it is imposing increasingly absurd targets and regulations on public servants and on the general populace.

Placing all this to one side, decisions made a decade ago took modernisation away from an ideology of democratisation and administrative reform based on professionalisation of party management, transparency and political reform at the national level to one of centralisation and patronage.

More could be said but let us close the matter there. That was then, this is now. The Tories are having a field day and will continue to have a field day undermining New Labour on matters that should be trivial in a well-run state. Already, 'undue influence' stories linked to the unions are emerging in relation to Remploy - which we believe absurd.

There is now an eighteen month window for Labour to take this criticism on the chin.  It should use the recent crisis to professionalise its administration and separate it further from the political control of Parliament and the State.  It should return to an agenda of party and national democratic modernisation. 

If not, it will either lose the next election or return so corrupted as to become unrecognisable as a Party of the centre-left.

Will this reform happen? Almost certainly not. The Party leadership has not yet identified the problem, let alone the solution and its retreat into the traditional herd-like solidarity of its aging membership (and the ambitions of its younger apparatchiki) make that fairly certain. But, we did our bit and we have moved on.