Ed Miliband has called on Labour to propose raising taxes for the better-off and impose a £5bn-a-year tax on the banks as he marks out a new dividing line with his elder brother David.
In an interview with The Independent, Ed Miliband claimed New Labour was haunted by three "old ghosts" which shaped its policies when Tony Blair became party leader in 1994. He said they were a fear of increasing taxes for high earners, a fear of Old Labour's anti-Americanism, which resulted in the Iraq war, and an unnecessary desire to protect the public from the views of Labour members, which led to a "control freak" style of party management and "hollowed out" party.
The shadow Climate Change Secretary made clear he wanted to end the cautious approach to tax adopted after it was blamed for the party's 1992 election defeat if he wins what is expected to be a close Labour leadership race between him and his brother next month.
David Miliband has backed the former chancellor Alistair Darling's plan to halve the public deficit in four years, with two-thirds of the money raised through spending cuts and one-third by tax increases.
But, in his interview, Ed Miliband said the previous government's policy was "a starting point but not the final word," adding: "I think we can change the balance [raised from cuts and tax rises] to support public services."
Although he declined to go into detail, one option would be to extend the reach of the 50p top rate of tax, which currently applies on earnings over £150,000, lower down the income scale – perhaps to £100,000.
Ed Miliband argued Labour needed to win back the support of lower and middle income voters who deserted it at the May election. He emphasised that any tax changes would not be "about hitting ordinary families".
On the banks, he said Labour should make permanent the one-off tax on bankers' bonuses to bring in £2bn a year and could raise at least another £3bn a year through a levy on the banks and a tax on financial transactions.
Rejecting claims by his brother's allies that he would take the party to the left, he said he did not regard a 50p tax rate or a proposed High Pay Commission as particularly left-wing. "I think I am appealing to the common sense of the British people," he said.
He returned repeatedly to his theme about Labour's old ghosts. "What always happens in politics is that a generation is shaped by particular events," he said, citing 1994. "Then the danger is that you get stuck in a particular period. What happened to New Labour is that we got stuck – defending flexible labour markets and not understanding the limits to markets at a time when the world had moved on.
"If you don't move with it, we end up being ideologically beached – defending bankers' bonuses, saying you can't have a [50p in the pound] top rate of tax on earnings above £150,000 and a [£7.60 an hour] living wage. You end up being out of touch with the public."
He added: "We became more cautious as time went on. The minimum wage and the windfall tax [on the privatised utilities] were pretty bold for their time. We became overly cautious. Government does that to you."
Yesterday the former minister David Lammy, who nominated Diane Abbott for the Labour leadership, announced he would vote for David Miliband. He said: "David offers the hope of a genuinely new political project. This means more than a shopping list of promises to different interest groups. Such a politics can appeal but never stands the test of time. There is one more vital thing David will change: our habit of retreating into a comfort zone in opposition – and staying there while the Tories do great damage to our country's social fabric."
Addressing a rally in London today David Miliband will reject David Cameron's vision of a "Big Society" and call for a "good society". He will say: "I want to lead a Labour movement, not just a machine. This movement has changed me. I am a different politician and a different person now."
Ed Miliband's thinking on tax emerged as Danny Alexander, the Liberal Democrat Chief Treasury Secretary, angered some Tory MPs by playing down the prospects of tax cuts before the next general election. He said the overall tax burden was likely to remain the same for the next five years. He told The Observer: "I think the tax burden is necessary as a significant contribution to getting the country's finances in order. So it will have to stay at that level for quite some time."
He added: "The plan we set out is to rebalance the tax system. We need the revenues from the taxes we are putting up to help us reduce the deficit."
Labour leadership timetable
Wednesday, 1 September: Ballot papers go out to Labour Party's 160,000 members. They have a third of the votes in Labour's electoral college, as do the trade unions and Labour MPs.
*The five candidates take part in a televised debate on Channel 4
*Tony Blair's memoir, A Journey, published
5 September The five candidates go head-to-head on Sky News
8 September Deadline for new members to join the party and vote in the contest
22 September Voting ends
25 September Result is announced at start of Labour's annual party conference, in Manchester
28 September New party leader makes first keynote address to the conference
13 October New leader faces David Cameron at Prime Minister's Questions for the first time