The Labour Party hasn't lost its way because what is currently the direction of its leaders has been part of its thinking throughout its existence. Labour has not betrayal of its core principles or "values". Its socialist credentials were always weak. The Labour Party was not created by people calling themselves socialists. In fact in its early days it made no claim to being a socialist party at all. It was set up by the Trade Unions, to act in the interest of those unions. The TUC agreed to the set up a Labour Representation Committee in 1900. Its aim was to get independent labour MPs elected who would change the law in the unions interests. It was in 1918 that the party adopted what it claims to be a "socialist" constitution that contained the famous Clause Four. This said it was the party's aim: To secure for the producers by hand and brain the full fruits of their industry, and the most equitable distribution thereof that may be possible, upon the basis of the common ownership of the means of production and the best obtainable system of popular administration and control of each industry or service. We would claim that it has never been a socialist party.
At its formation and in its early years the Labour Party had little connection with the growth of a socialist minority or even with the more militant sections of reformists. There were always some trying to build a "fairer" society but what emerged from years of effort was not a slowly evolving socialism but a labourism which increasingly judged itself on its electoral success, which depended on its ability not to rock the capitalist boat it was trying to captain and steer.
The Labour Party became associated with the name of socialism largely because of its history of supporting nationalisation, misleadingly called "public" or "social" ownership. Quite what was hoped to be achieved by bringing industry into state instead of private ownership was not very clear apart from as a vague and fuzzy means to "greater equality". Central planning under nationalised industries was supposed to transform capitalism into something that could be controlled by the state. This did not happen of course. Labour governments were clothed in the misleading garb of collectivism but they were always managers of capitalism. As part of the state wanting more state control the party attracted to itself those sections of the ruling class who would benefit from it. Nationalisation is not, and never has been, Socialism. Socialism means the common ownership of the means of production and distribution. It means getting rid of the bosses, getting rid of working for a wage or salary, getting rid of the whole rotten buying and selling system. It means that people will freely come together to produce what is needed and will freely take from the abundant products of their labour. It will involve the abolition not only of the ruling class, but also their state. It will not mean that state being replaced by a new state. Nationalisation is just one form of state capitalism.
It is often argued the welfare state, social security provision and council housing are examples of Labour's success in "doing something". The simple fact is that social welfare do not change the exploitative character of capitalism or even touch the surface of its symptoms. Poverty was not reformed away and poor housing, unemployment, job insecurity and related ill-health remained very real concerns for the working class. Faced with the reality that is capitalism workers want to do something about it. Clearly the solution needs to be at least partly a political one, so they look for a party which seems to offer change. Labour are most able to offer this because they are usually a party of opposition. Being out of office so frequently they can always claim that next time things will be different. However, things never can be different. The time has come to give up on the pretence of any hopes that remain for Labour. To successfully change society the working class will have to do away with all capitalist parties and institutions. This inevitably means that they will have to do away with the Labour Party