Ed Miliband's policy coordinator has said it was "vital" that leftwinger Jeremy Corbyn be included in the Labour leadership contest.
Dagenham MP Jon Cruddas also let slip on Wednesday that he was involved in setting up an English Labour Party.
In a speech at the IPPR think-tank in central-London, Cruddas said Labour should not underestimate the scale of its election defeat in May. "We seem to have lost everywhere to everyone," he said. "Arguably this is our worst defeat for a hundred years and what we can’t do is swerve around the collision with the electorate that has just happened."
Andy Burnham, Yvette Cooper, Liz Kendall and Corbyn are all fighting to succeed Miliband. Corbyn, who is far to the left of the other candidates, is seen as unlikely to win but his inclusion has widened the debate.
"That's why I think it's good that Jeremy Corbyn is in there," Cruddas said. "I know this is a minority opinion in Labour at the moment, but I think he can sort of detonate a few things. That's the key, it needs to be, dare I say it, blown up a bit. It's vital that Jeremy Cobyn is in this debate."
Cruddas, who is conducting an in-depth review into what caused Labour's defeat, said he would not be voting for Corbyn but his presence on the ballot would hopefully force the other three to "raise the game". He said he would eventually choose the candidate who "seeks to own the defeat" and who "comes up with the most innovative thinking".
The former shadow cabinet minister also warned the party that it should not assume the only way was up. "I don't think we can assume this has bottomed out by any means. We thought that in 2010. Then we lost seats. The defeat in Scotland isn't just by one or two hundred [votes], this is by ten or fifteen thousand. The scale of the challenge posed by Ukip should put paid once and for all this idea it disproportionately hurts the Conservatives, because that's just mad thinking," he said. "A lot of people we have lost are Sun readers," Cruddas added.
Earlier today Alan Milburn, the former health secretary, said Miliband's belief that voters had moved to the left had "sunk" Labour. "We had the wrong leader and we had the wrong approach. Inevitably, we paid the price. We could not have got it more wrong,” he said. Milburn backed Kendall for the leadership and attacked Burnham as "delusional".
Cruddas also frankly conceded that Labour's "35% strategy" of winning over Liberal Democrats while the Tories bled support to Ukip had been a mistake. "The two big calls strategically of Labour in the last election can be brought into question. We put big bets on what would happen to Liberal votes and what would happen to Ukip voters and we were wrong on both," he said. The leadership, he said, thought it "couldn't lose". But was wrong.
He said rather than creating a election platform based on "hope, optimism and national renewal" it has just offered "free money politics" such as a raise in the minimum wage or a cut in fuel bills.
And he said David Axelrod, president Obama's election guru who was brought into advise Miliband, had been deeply unimpressed with the party's strategy. Cruddas said: "He came over and said: 'this is just a list of microwaves, you're not selling microwaves here'."
Cruddas, who thinks of himself as part of the "radical" English tradition, said he was helping to set up an English Labour Party within the wider UK party. "If you look in the Labour rule book, you have, in rule, a Welsh Labour Party, in rule, you have a Scottish Labour Party, but you do not have an English Labour Party, it seems to me that speaks volumes." he said.
He revealed: "We should develop and create and English Labour Party and we are going to do it actually, I'm not sure I should have said that."
Cruddas said the new group, which would be created over the next month, would be much more than a talking shop. "It will be a very significant new part of the Labour infrastructure," he said. He said eventually the new English Labour Party should take its place as a formal section alongside Welsh and Scottish Labour.
Elected in 2001, Cruddas had a good view of the Blair-Brown wars. He said one of the guiding principles for what Labour should exist to do was "not just to shoot others in your own party."