Labour must keep thinking radically or run the risk of becoming irrelevant, Peter Mandelson has said.

Defending "third way" solutions in health and education, the former minister says government must extend the choice agenda.

Following a record rebellion foundation hospitals, Mandelson told ePolitix.com that ministers should not back off from "sophisticated solutions".

"People fear change. Some people think it's better to keep to the model of monolithic, one-size-fits-all public services," he said.

"But I think the majority in the party are persuaded that you need both choice and equity in the provision of public services and [that] is certainly what other European countries, notably in Scandinavia and the Netherlands are doing."

As the Progressive Governance conference continues in London, Mandelson says New Labour is acting as a "model" for other centre left governments around the world.

"People are looking to Britain as a model of the centre left in government," he says in an exclusive ePolitix.com interview.

Looking ahead to a third term of office, the New Labour architect urges the prime minister to become more radical.

"We need to fix our sights on a third term agenda so that we maintain momentum and remain a government of real transformation," he says.

"What we have to achieve will by definition never end. There are always changes in society and in the world that we need to respond to.

There are always more complex problems which require more sophisticated solutions that's why you never become complacent, you never stop thinking, because if you do you become less relevant."

"We are determined to avoid that," he adds.

The former Cabinet minister warns the government not to lose sight of the broader themes as it concentrates on delivery.

"You both have to deliver change and renew your ideas whilst you are bringing about day to day delivery," Mandelson says.

"And that is hard because the temptation is always to become absorbed in the day to day running and administration of the government rather than lifting your sights, seeing the bigger picture and constantly reappraising how you need to adjust and respond to new challenges which require more sophisticated responses.

"But you do have to do both those things in order to maintain the momentum and the pace of change that you want to bring about."