Britain must shift to a more highly skilled economy in a bid to ease the burden on the squeezed middle, Labour leader Ed Miliband has said.
The next Labour government would not be able to simply increase tax credits for the less well-off as it did during the Gordon Brown years, he said. Instead, the UK had to move away from its "low-wage economy" so that workers were better paid and could help stimulate economic growth, Mr Miliband told a conference at the London Stock Exchange.
"The redistribution of the last Labour government relied on revenue which the next Labour government will not enjoy," he said. "The option of simply increasing tax credits in the way we did before will not be open to us."
Mr Miliband called for a greater emphasis on "predistribution", ensuring people are better paid rather than relying on tax credit top-ups.
"Predistribution is about saying we cannot allow ourselves to be stuck with permanently being a low-wage economy," he said. "It is neither just, nor does it enable us to pay our way in the world. Our aim must be to transform our economy so it is a much higher skill, higher wage economy."
Mr Miliband said future governments would have to make "work itself pay".
"That is how we are going to build growth based not just on credit, but on real demand," he said. "And that is how we are going to help the squeezed middle of this country and build a better economy when there is less money around."
Mr Miliband said Labour needed a "new agenda" and cannot revert to the approach of the last government when it gets back into office. He rejected suggestions that the party could simply wait for the Government to fall.
"There are some who believe that this economic failure means that all the Labour Party needs to do now is attack the Government, sit back, wait for it to fail, wait for it to fall, so that we can go back to governing as we did before.
"But that would be the wrong strategy for my party and the wrong strategy for our country. The lesson that Ed Balls and I take from this summer is the opposite - we need more change, not less."