Labour is facing a critical test in its relationship with members and unions, the party's chairman has admitted.

Ian McCartney admitted the government is at a crossroads and that the party conference season could be uncomfortable for Labour's leadership.

"We are now in mid-term...How we come out of it will colour whether we can be the natural party of government or revert to being the natural party of opposition," he told The Times.

McCartney said that recent events had tested an administration more used to success.

"For 11 years, ever since Major won, we have known nothing but political success and we have may have taken it for granted. We are now experiencing mid-term strains with events like Iraq, which have caused significant problems in the party," he said.

He warned Labour's supporters that evidence of real change in areas such as public services could be years away.

"We are on a journey and at every stop we should point to a new school, hospital or sports centre, but to get to the final destination of modernising all public services or lifting every child out of poverty, it may be a wait lasting as long as a generation," McCartney said.

There was also a strongly-worded warning to MPs on Labour's left for helping to create a "fog of dissent" which had clouded media coverage of the government's achievements.

He told the Times that "one or two of the usual suspects" had made political capital out of divisive issues such as foundation hospitals.

He said they had falsely allowed themselves to be portrayed as representative of the Labour Party.

The party chairman, who is seen as a key union ally in the government, also warned that the trade unions is facing up to an ageing membership and falling numbers.

Said McCartney: "Why is it, with record levels of employment, membership of the unions is stagnant? If you keep telling people you are not an effective organisation, why should people join?"

He also attacked the union leaders who were "pretending they are victims, rather than partners of the government".

The Cabinet minister claimed union chiefs had got more out of the government than they were prepared to admit.

"There comes a point where people have to make a decision; they cannot keep campaigning for the government of their dreams and risk ending up with the government of their nightmares," he said.