Blair ally Patrick Diamond tells Ed Miliband: cost of living will not win Labour the 2015 election

Ed Miliband has been warned by a prominent Blairite that his campaign on the “living standards crisis” will not win Labour the 2015 election because the party lacks credibility on the economy.

Patrick Diamond, a former Downing Street policy adviser to Tony Blair and Gordon Brown, said Britain’s return to growth and an expected rise in wages next year would hand George Osborne the “trump card” unless Labour acts quickly.

He expressed fears that the Chancellor’s Autumn Statement this month might prove to be the moment Labour lost the next election.

Writing for The Independent’s website, Mr Diamond accused the Labour leadership of giving the impression it is “coasting” to victory in 2015 because the Coalition is unpopular and of failing to reach out to the non-Labour voters his party needs to win.

Although Labour’s poll lead suggests it will regain power in 2015, Mr Diamond’s stark public warning lifts the lid on simmering tensions inside the party. Allies of Mr Blair are worried that the strategy pursued by Mr Miliband and Ed Balls, the shadow Chancellor, will crumble as a recovering economy boosts the Conservatives’ prospects.

Mr Diamond wrote: “Months of adept opposition campaigning on ‘the cost of living’ have been brutally swept aside by a slew of positive economic data – alongside the hard economic choices with which the Chancellor is confronting Labour.”

He added: “Unless it can adapt its position in response to fast-changing events, the hallmark of any adroit opposition, Labour will be behind before the contest is properly under way.

“The party is at risk of falling victim to fundamental strategic miscalculations. Off the back of a less severe defeat in 2010 than widely anticipated, there is a common belief Labour can somehow coast to victory: all it needs to do is sit tight and watch the Coalition parties grow unpopular in the face of indiscriminate public sector cuts.”

New Labour figures like Mr Diamond fear that Mr Balls wants to leave key announcements on the party’s tax and spending policies until January 2015. “With an election looming, the party cannot afford to waste the next year. There is not a moment to lose,” he said. “If Labour is serious about becoming a party of government in 2015, it needs to get its act together – fast.”

Mr Diamond, a senior research fellow at the Policy Network think-tank, claimed the memory of Mr Blair “continues to paralyse the Labour leadership: as a result, he is air-brushed out of history”. He said: “What Labour must do is move on definitively from the Blair-Brown era. That requires a more sober, objective assessment of New Labour’s successes and failures than anything offered so far.”

Mr Diamond said that for Labour to have a chance of victory in 2015, key strategic decisions must be taken – to ensure a credible account of how the party will bring the public finances back to surplus in the next Parliament, a manifesto commitment to balance the books and a compelling growth strategy. He echoed recent calls by Mr Osborne and David Cameron by calling for “a leaner, smarter, more strategic state”.

Labour leaders insist they have made progress in regaining their reputation for economic competence and say their living standards campaign shows the party is in touch with millions of people.

Last week, Mr Balls launched a “zero-based spending review”, saying he wanted to put the nation’s budget back into surplus. But he hinted that he might not reveal the detail of his spending cuts until after the election and said he would not be drawn into an “auction” with Mr Osborne on welfare cuts.