In his first leadership speech to a Labour Party conference, Mr Smith portrayed the Tories as the party of selfishness and greed, and the Prime Minister as a man out of his depth.
Setting out his core distinction between Labour and the Conservatives, Mr Smith said: 'We believe that the power of all of us together can advance the good of each individual . . . they believe people are driven purely by greed and self-interest.'
The Prime Minister had created 'not a classless society, but a heartless society, ruled by a government devoid of any sense of responsibility for its people,' Mr Smith said.
In a stinging personal attack, he said Mr Major had no alibi for the dole queues, poverty, housing repossessions and a collapse of industrial investment that had sent manufacturing industry to the breaker's yard.
As Chief Secretary to the Treasury, Chancellor of the Exchequer, and then Prime Minister, Mr Major had designed and delivered disaster. 'It is all his own work,' Mr Smith said.
The onslaught was a deliberately strong mixture of sweeping mockery and detailed dissection, prompted by a Labour judgement that Mr Major is highly sensitive to personal criticism. As one party official put it: 'It gets under his thin skin'.
Mr Smith said: 'Two weeks ago, confronted with a sterling crisis of their own creation, we saw a government gripped by indecision, paralysed by fear, and a Prime Minister plodding on to
Mr Major had only one policy - wait and see. 'The result was total humiliation. Not only for himself and his government. He has humiliated Britain,' Mr Smith added.
The opt-out Prime Minister had led a do-nothing government off the European stage. 'We were promised a New Statesman, and what have we got instead? The Spectator.'
But that humiliation, he added, had been capped by Monday's apology by Norman Lamont to the Germans, blaming the press for reporting Downing Street guidance that the Bundesbank had sunk the pound.
'If ever there was a time for apologies to be made,' Mr Smith said, 'it is certainly now. It is not just Norman Lamont who should be apologising - it is the Prime Minister. He should apologise to the British people for his betrayal of their trust.'
The tragi-comedy of the withdrawal of sterling from the European exchange rate mechanism had degenerated into Whitehall farce. 'John Major and Norman Lamont - the Laurel and Hardy of British politics. Another fine mess they've got us into.'
Mr Smith said Tory ministers urged managers to weed out the idle and incompetent, and called for performance-related pay. But he wondered why, if Mr Major was so keen on such management techniques, he did not apply them to his own Cabinet.
'The fact is, if the Government were on performance-related pay, the taxpayer wouldn't be paying them, they would be paying the taxpayer.'
Labour's strong commitment to Europe, overwhelmingly endorsed by the conference on Monday, was also reaffirmed by Mr Smith.
But he emphasised that the central question of leadership meant active government, not absence of government. 'Government taking responsibility, not pointing the finger at somebody else. Government caring about all the people, not just looking after its own.
'Government acting to help industry, create jobs, boost the housing market. Not sitting on its hands waiting for those green shoots to sprout.'
Mr Smith said that, more than anything today, Britain needed 'leadership to take the long view of problems and to act and to solve them. To anticipate future tensions and to act to avoid them. To restore hope. Leadership to make people feel their voice is being heard, their needs are no longer being ignored.'
Conference reports, page 8
Leading article, page 22
Andrew Marr, page 23
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