Take another look at us. That was the message of Ed Miliband's speech at the ippr this morning. With growth almost non-existent, youth unemployment at 1 million and the government set to borrow £109bn more than planned, Miliband believes that there is a newly receptive audience for Labour's economic alternative. Still suffering from the cold that was evident at yesterday's PMQs, he began by reminding his audience that George Osborne had promised "a steady and sustained economic recovery, with low inflation and falling unemployment." But Britain now has the highest inflation in the European Union and a lower growth rate than every EU country except Greece, Portugal and Cyprus.

The problem, as Miliband conceded, is that many still believe there is no alternative to Plan A: "You hear it a lot these days. People saying, we're just in for a bad few years. It's one of those things. It can't be helped." But the Labour leader, who taught economics at Harvard before he entered parliament, cited the experience of the 1930s as proof that government was not "powerless in the face of hard times". He went on to deliver one of the best defences of Plan B we've heard.

The Conservatives insist that one more pound of additional borrowing would send Britain the way of Greece, Portugal and Italy. But Miliband rightly rebuked thoe who "peddle simplistic parallels". Britain, with the ability to devalue its currency and to print money, has far more room for manoeuvre. Osborne argues that Labour has no credible deficit reduction plan but, without growth, neither does he. When the Chancellor delivers his autumn statement next Tuesday, he will be forced to announce tens of billions in extra borrowing. With the government certain to miss its deficit targets, the question voters will ask is "what was all the pain for?"

Miliband's cause was aided by Tory MP David Ruffley, who revealed on the Today programme this morning that "there is even talk on the backbenches of temporary tax cuts, even VAT being cut for a period." A temporary cut in VAT, of course, forms the centre point of Labour's now ubiquitous "five-point plan for jobs and growth". (To the evident relief of the audience, Miliband didn't recite all five points.) The plan also includes bringing forward capital spending and levying a bank bonus tax to fund a job creation programme.

But the problem for Labour remains that voters view these measures as individually wise but collectively foolish. They continue to believe that there is little or no room for fiscal stimulus, not least because, in their eyes, it was overspending by the last Labour government that got us into this "mess". Indeed, some in Labour continue to believe that the party will not earn the right to be heard on the economy until it apologises for the profligacy of the Brown administration. But those waiting for an apology for Miliband do so in vain. He vowed that he would never accept "the propaganda" of the Conservatives, which suggests that it was overspending that lead to the crash, rather than the crash that led to overspending.

In spite of this, he remains determined to counter the perception of Labour as fiscally irresponsible. In one of the final sections of his speech, he acknowledged that the failure of Osborne's plan means that "the next Labour government is likely to inherit borrowing levels that still need to be reduced." Indeed, if, as seems likely, the Office for Budget Responsibility concludes that the structural deficit - the part of the deficit that remains even after growth has returned to normal - is far larger than first thought, that will have major implications for Labour's own plan.

In these straitened times, Miliband recognises that you can no longer spend your way to social democracy. He spoke of the need for a "different way of delivering social justice" and for "long term change in the way our economy is run." If he is to be seen as a credible prime minister-in waiting, it is that agenda he must flesh out in the coming months.