Exactly right. It needs to redefine itself and it's position on the political spectrum. It also desperately needs to sort it's PR out.
As the biggest single failing of the Labour Party in that election and the 5 years that preceded it, was their complete failure to challenge the completely false claims by the Tories about the state of the economy at the time they took office, in ration to the cause.
The Tories had not objected to any Labour spending pre the crash and the crash wasn't their fault, however the Tories spun the crash into a Labour overseen disaster and the Labour Party came back with knack all. They also completely failed to remind the electorate that the party who were the ones we can supposedly trust with the economy had overseen a double dip recession.