Steve Richards: It's time to move on from New Labour

Labour's first proper leadership contest since 1994 comes down to an increasingly highly charged battle between two brothers. Apparently a party that governed for 13 years has no other serious candidate. Even in the depths of unpopularity after 1997 the Conservatives managed to find potential leaders from at least two families.

Labour has opted for such a narrow choice. There is a third candidate who has some of the qualities required for the long haul ahead and he is not a Miliband. On Friday Ed Balls gave a barnstorming speech on economic policy, delivered with the self-confident flourish of an economist who knows where he stands. There was no agonising about whether the party risks returning to a New Labour comfort zone or an old Labour one, an introverted theme of the Milibands' recent spat. Balls leaves all that anguished, imprecise positioning behind him. Instead, as the only candidate to focus an entire speech on the economy, he grasped the defining policy area of our times and exposed vividly the risks of the Coalition's approach.

Balls is a follower of John Maynard Keynes and supports as a matter of conviction government activity in times of crisis. But the political positioning that follows also makes sense for his party. There is no point in Labour being a polite echo to the Coalition in relation to the economy. If the current Government proves to be right in its analysis that the deficit must be wiped out in a single parliament, Labour will not win the next election. If, as is more likely, the speed and depth of the cuts make matters worse, the unrelenting clarity of Balls' analysis will resonate.

In addition, Balls is also the only candidate for certain who would be able to withstand the onslaught from the media and the disdain of columnists. He has been the subject of attacks for several years, personal and political, and of incessant briefings from colleagues insisting that he is an incessant briefer against colleagues, circuitous gossip of the least illuminating variety.

He keeps going, seemingly unhurt and undisturbed. He does so to such an extent I suspect ultimately he would get more respectful media coverage as a leader than other candidates. In the New Statesman this week Rupert Murdoch's ally Irwin Stelzer writes a semi-flattering column on Balls. I am told that Stelzer volunteered the article. Even when there is fundamental disagreement over policy most media types struggle in the end to ridicule determined authenticity.

Of course Balls lacks several leadership qualities, but so do all the candidates emerging from the shadow of the Blair/Brown duopoly. I wonder if Labour will come to regret turning the contest into a duel between two brothers. I am sure it would have been healthier for the Milibands if the race had been wider.

Balls is wrong when he suggests the media has narrowed the choice to the Milibands. When most of the former cabinet back David and the big trade unions nominate his brother, and both secure the support of most MPs, the media knows where to turn.

The level of his support shows that Ed Miliband had no choice but to stand against his brother. I read the other day that he acted out of jealousy. That is nonsense. He has spent the last couple of years bumping into all sorts of people urging him to be a candidate. Labour do not stage leadership contests very often and he would have been foolhardy not to respond to intense solicitations. Still he agonised about whether to do so.

The army of ultra-Blairite/Cameroon columnists, and Peter Mandelson in his silly interview yesterday, portray his candidacy in ways that are typically assertive and absurd. With a familiar swagger they suggest knowingly that Ed is courting only Labour's core vote and wants to return his party to the 1980s. In other words they accuse the younger brother of actively wanting to lose the next election, an objective no aspiring leader is known to have previously held: "Vote for me and I will lead you to defeat".

The army goes on to argue that the only way Labour can win is to stick with New Labour – whatever that means – and adopt Tony Blair as their model leader. In a world of few certainties, I am one hundred per cent sure that the advice offered with such persistence is wrong. The reason for my confidence is based on what happened to Labour and Blair in the final years of his leadership. David Cameron worked out brilliantly how to deal with Blair's version of New Labour. Cameron supported it, arguing that those who wanted Blair's vision to be realised should back the Conservatives. Sure enough, Cameron continues where Blair left off in most policy areas.

By the time Blair took his bow Labour was miles behind in the polls. There is no point in seeking power as Cameron's echo and no route to victory from following such a path. A progressive coalition, possibly in partnership with others, that espouses Keynesian economics, pluralist politics, and a more subtle relationship between state and markets than that hailed by Blair and the Coalition, is the only credible alternative for Labour. The tortured triangulation of the mid-1990s, a brilliantly successful election-winning formula leading to paralysis in government, support for the war in Iraq and Brown's prime ministerial nightmare, is not available as an option next time.

The potentially significant difference between the two brothers is over the role of government. In a speech last week David argued Gordon Brown was "wrong about the role of the state", suggesting that Brown was too statist. This is too vague and simplistic. The banking crisis showed Brown failed to be interventionist enough and that in relation to public services at least he recognised the limits of applying market-based solutions indiscriminately. Brown's failure was in not coming up with a distinct alternative, a big challenge for the next leader that no candidate has properly addressed.

If I felt that David shares the childishly imprecise view articulated by Mandelson yesterday that it's New Labour versus pre-New Labour (whatever that means) I would urge without hesitation a vote for Ed, as a way of breaking away from all this destructively vague stupidity. But David is adamant that he wants to move on from the past too and his ministerial record in domestic departments points to a more focused radicalism. In his arduously balanced speech last week he also argued that Blair had failed to focus on income inequalities, stopped devolution prematurely and too often defined himself against his party rather than the Tories. The last point is extremely important. David will come under a lot of pressure from his ultra-Blairite supporters to "take on his party", the old device for looking "strong". The device will not work any more. It will give the impression, perhaps accurately, of a party at war and Cameron will deal with it deftly: "I support the Labour leader. What a shame his party doesn't."

Whoever wins will be urged to fall into the trap. I will limit this column's advice to suggesting the winner should take a note from the overlooked Balls and set a fresh course irrespective of the noisy chorus calling on the victor to adopt policies that are little different to Cameron's. The big test for the brothers is not what happens in the next few weeks, but how the winner responds once the votes are cast and the going gets much, much tougher than the psychodrama of a familial contest.

s.richards@independent.co.uk