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By Tony Grew - 14th September 2009
Labour must demonstrate a commitment to sound finance and public service reform if it is to fight back against the Conservatives, Lord Mandelson says.
The business secretary also said the party should enter the next election with confidence and new policies rather than promise business as usual.
He insisted that there is "a real choice to be had between the progressive reform offered by Labour and the ideologically-driven retrenchment and deep cuts offered by the Tories".
"But Labour will only win this argument by demonstrating its continued commitment to fiscal responsibility and remaining the change-makers in British politics," he said.
In a major policy speech on Monday, he set out the party's response to the economic and political challenges of the global financial crisis.
Lord Mandelson said those challenges are "formidable, but they are not ones that we in the Labour Party have been cowed by".
He said the party should be "confident as we frame the electoral choice the country will face in the coming year".
The cabinet minister, seen as Gordon Brown's most influential adviser, set out "three pillars" for future prosperity.
"First, while the freefall in the economy may have been brought to an end, the effects of the recession are not yet behind us," he said.
"This is why maintaining government spending and investment is vital.
"Second, government must actively invest in the economic growth of the future.
"It is growth that will be the biggest antidote to debt and will determine how far and fast we are able to pay it down in the future.
"We need continued government action if we are to create the right competitive conditions for the UK economy to generate future jobs.
"And, third, a responsible approach to reducing the fiscal deficit that will not eat into the fabric of people’s lives.
"In order to fight the crisis all leading economies have had to borrow more.
"The costs of not doing so would have been colossal in human terms and in the damage done to our economy, resulting in lost growth for many years to come.
Lord Mandelson said Labour has always been "committed state reformers" and attacked the Conservative Party.
"David Cameron has followed a policy of concealment, not change," he said.
"But the two faces of his Conservative Party are increasingly on show. The one they want to present to the public of a revamped Tory party. And the other that betrays the reality of traditional right-wing Conservatism.
"If we had followed the course the Tories urged on us, the recession would have been deeper and longer, and the costs to our public finances far worse."
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