In the first of a series of speeches designed to kill criticism of Labour's lack of punch, the party leader appealed for a bold and ambitious change in policy. He told the Labour local government conference in Bournemouth: 'Since our policies must be for real, affecting real people in the real world, they must always be pragmatic and practical . . . .
'What we need is a new political approach for a new political era. A new politics that puts people first, that rejects dogma, and embraces practical common-sense solutions.'
The new Labour politics, he said, would translate 'our enduring values of freedom, democracy, responsibility and justice' to the benefit of all citizens. The absence of the word 'equality' from that list of values was noted by some delegates - while others were disappointed that Mr Smith did not go into the specifics of the change he wanted.
That was left to behind-the-scenes briefings in which it was said that Labour was attempting to shake off its image as a party of nationalisation, business bail- outs and high taxation.
Labour worries about the lack of specifics are shown in moves to form a new grouping around Bryan Gould, who stood against Mr Smith for the Labour leadership, to articulate policy ideas.
Colleagues of Mr Gould's insist there is no move to form 'a party within a party', reopen the leadership contest or create a formal pressure group. But they believe Labour needs to start articulating a radical agenda, crucially around the economy but in many other areas too. 'The feeling remains that the current leadership is still more interested in reassuring the electorate than exciting it,' one said.
Mr Smith will be setting out his political stall in seven speeches to be given in the run-up to May's local government elections.
Meanwhile, the Shadow Cabinet will meet for a full-day session in London next Monday to chart the party's positive agenda. Gordon Brown, the shadow Chancellor, is expected to give that meeting a detailed picture of Labour's 'new economics' and he is due to make a speech setting out his ideas next week.
Mr Smith said yesterday that he wanted 'a long-term strategy organised around the belief that our most important priority is to invest in people - to invest in the opportunities and skills that are the building blocks for individual and national prosperity.'
Condemning the 'simplistic arguments' and 'sterile debate' about nationalisation and privatisation, the Labour leader said that the issue of ownership was largely irrelevant.
Labour saw clearly the merits of the mixed economy. But the Conservatives had been left behind, and their 'fixation' with privatisation showed the 'mania about ownership' had moved from the Left to the Right of the political spectrum.
As for Labour's attitude to taxation, Mr Smith won a strong round of applause when he echoed a theme from last year's election campaign, saying: 'I want to see a fair tax system based on people's ability to pay.'
Mr Smith, as shadow Chancellor, used similar terms to explain the need for
his controversial proposal to abolish the upper earnings limit on National Insurance contributions in the April general election.
Yesterday, however, he added a line that reflected the high-level party view that it should go for lower income tax. 'I want a society,' he said, 'which encourages achievement and rewards hard work.' Donald Dewar, Labour's social security spokesman, said yesterday that there had to be radical change in his field - 'not to help the Chancellor but to help those who are in need'. Speaking on BBC Television's On the Record, he said the pounds 80bn social security system was plainly 'not delivering as effectively as it should'.
He added that he was not afraid to discuss targeting of benefits, even of child benefit. But he said that he would not be party to removing it until he was satisfied that whatever replaced it dealt with child poverty. Key problems of simplification, take-up and stigma had to be overcome if targeting was to be improved, he said.
Tony Benn said Mr Smith's speech appeared to embrace individualism and repudiate both socialism and social democracy. 'It looks as if Labour is being asked to dismantle itself and be prepared to enter a coalition government.'
But Mr Smith's call for change was underlined by John Edmonds, the influential general secretary of the General and Municipal union.
He told the conference that at the last election, Labour had 'segmented the electorate' into different interest groups, which had each been offered 'a little carrot . . . And sure as hell it did not work.
'What we forgot somewhere as we cleaned up our act and purged ourselves of our unelectable policies is that deep down in everyone - even during a long recession - there is ambition.'
Senior Conservatives said Mr Smith's speech simply showed they were winning the argument. Michael Howard, Secretary of State for the Environment, said that each time Labour had lost 'it has tried to present itself as a paler version of the Conservative Party'.
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