In his most important speech since he became leader last summer, Mr Smith will warn the party that it will only have a chance of winning an election when it embodies the 'aspirations of ordinary people in this country for a better life for themselves and their families'.
Mr Smith's speech to the Labour local government conference in Bournemouth will be seen as a conscious break with Labour's traditional collectivism in favour of a programme directed towards the voter as citizen and consumer.
Labour has sweeping policy reviews - on economic, tax and social policy, and on the constitution - already well under way. Mr Smith, who is aiming to set the agenda for the reviews, will tell his audience that there is no place for old dogmas in the new Labour Party. He will add: 'We must embrace change as our ally but our policies must always be pragmatic and practical.'
Mr Smith will reject the unbridled private sector of the Thatcher-Reagan years and the command economy favoured by Labour in the past, saying that the 'mania about ownership has moved from left to right'.
His message will convey that, as Labour was wrong to believe that state ownership provided all the economic solutions, so Conservatives are wrong to believe that privatisation and unregulated market forces are an answer to deep-seated economic problems. Active government has a role in ensuring that citizens have the power and knowledge to stand up to the vested interests of big business and the state, he will argue.
Mr Smith is to develop some of the themes in today's speech in a lecture in memory of R H Tawney in March in which he will argue against the nostrum of liberal economics, that individuals are only interested in their own prosperity. But in seeking to push Labour towards recognising voters' goal of 'enlightened self-interest' he will argue, in effect, that altruism is not enough to return a political party to power.
In today's speech he will say that Labour's goal must be the 'advancement of the individual, their freedom, autonomy, ability to participate, and capacity to prosper'. He will argue that in a world of multinational ownership and inter-dependent economies 'the only truly national asset at present is the skills and accumulated knowledge' of the people.
The tone of the speech will delight reformists within the party who have been anxious that Mr Smith was showing signs of slowing the policy and organisational reform begun by Neil Kinnock.
In the shake-up of Labour headquarters, four new high- powered departmental directors will be appointed in an attempt to professionalise and modernise the party machinery. A post of director of campaigns and elections will be created to oversee all aspects of the next general election campaign, including, but not confined to, media presentation.
David Hill, the director of communications, will take over as media spokesman in Westminister while the other three existing directors will be invited to apply in open competition for the jobs.
The shake-up makes it more likely that Geoff Bish, veteran head of the research department, which is to be beefed up as a full- scale policy directorate, will leave his job at party HQ.