'Project Ed' to be relaunched –with a dose of economic reality

The Labour leader today takes the fight to Cameron in a speech focusing on a 'responsible capitalism'

Ed Miliband will today warn Labour that "the party is over" and that if it regains power it will have to cut rather than boost public spending.

In a speech seen as crucial to Labour's and his own prospects after a difficult start to the year, Mr Miliband will seek to reassure voters that his party accepts there can be no return to the ever-rising state spending of the Blair-Brown era.

"Next time we come back to power, it will be different," he will say. "We will be handed a deficit. Whoever is the next Prime Minister will not have money to spend. We will have to make difficult choices that all of us wish we did not have to make."

Crucially, he will argue that accepting the need to wipe out the deficit does not mean making the same choices as the Conservatives. "Labour knows what fairness means. It always will. But we must rethink how we achieve it for Britain," he will say.

Mr Miliband will outline three ways Labour would deliver fairness without raising public spending – reforms to ensure long-term wealth creation with rewards fairly shared; tackling vested interests such as the banks, energy and rail companies and making choices that favour the "hard-working majority".

Labour aides deny today's speech to the London Citizens community organisation is an attempt to relaunch Mr Miliband's leadership after growing internal criticism and fears that the party is losing the economic argument.

The Shadow Cabinet has been agonising over the Opposition's stance for weeks. Ed Balls, the shadow Chancellor, has been reluctant to give any impression that Labour is endorsing the Coalition's economic strategy because he is convinced its cuts have strangled growth.

Mr Miliband has insisted Labour toughens its language on the deficit. He will say: "In the short term, where the Government is stripping demand out of the economy, we would go less far and less fast. We call for these things not because we aren't interested in dealing with the deficit. We call for them because we are. And the sooner growth and jobs return the easier it is to deal with the deficit we face."

Mr Miliband will say Labour's offer at the next election will be different to both the Conservatives and the previous Labour government. He will admit: "The ideas which won three elections between 1997 and 2005 won't be the ideas which will win the election in 2015."

Dismissing the sniping about his performance, the Labour leader will argue that he has set the political agenda on "the squeezed middle, the next generation and responsible capitalism".

He will say: "Suddenly David Cameron is falling over himself to say he too is burning with passion to take on 'crony capitalism'. Now he has accepted this is the battleground of politics, I say: 'Bring it on.' The core belief of David Cameron is that we can solve the problems Britain faces by government getting out of the way. His answer to the problems thrown up by an economic crisis caused by faith in free market fundamentalism, is simply more of the same."