Labour are becoming "the conservatives of British politics", Nick Clegg said as he launched a staunch defence of the coalition's public spending cuts.
The Deputy Prime Minister said that while deficit-reduction measures might leave the poor financially worse off, better access to public services meant they would benefit most.
But Labour was stuck with an outdated notion of "progressive" politics based on state intervention and how much money voters had in their pockets, he suggested.
He also warned Labour that it risked being excluded from power if it failed to accept that coalition governments had a "bright" future in British politics. And he used an article in The Guardian to accuse Labour leader Ed Miliband of "political posturing" over the 50p tax rate.
"The question is not how much money the state is spending, it is how it spends it. The real progressive test for any form of state intervention is whether it liberates and empowers people," he wrote.
"Labour risk being on the wrong side of this divide. They are becoming the conservatives of British politics, defending outdated approaches rather than looking forwards to a new progressive future. Of course it is better to have more money, even if it is only a little more. But poverty is also about the quality of the local school, access to good health services and fear of crime."
Mr Clegg hit out at claims the Lib Dems had "betrayed" voters by abandoning pledges such as opposition to tuition fee rises as part of the power-sharing deal with the Tories.
"Labour is in danger of being left behind, of becoming stuck in an anti-pluralist rut. If you see every compromise as a betrayal, you will never understand plural politics, and will certainly never be able to engage in it. But I am convinced that even in these difficult times, the prospects for a plural, new progressive politics are bright."
Seizing on Mr Miliband's call for the 50p top rate for those earning over £150,000 to be made permanent, he called it a "classic example of old progressive myopia, making a shibboleth of one aspect of the tax system rather than looking at it in the round.
"Our tax system needs real reform, not political posturing," he added.