Bring it on

We can and will expose Cameron Conservatism to be as out of touch and unsuited for these times as La

"The election's a foregone conclusion . . . Labour can't win a fourth term . . . The centre left is in crisis . . . We need to reinvent ourselves . . . Let's debate how 'modern' Cameron's Conservatives are - and who should be Labour's next leader." These assertions - some from the Tories, some from their friends in the media, some from our own side - stem from different motives. But anyone who wants a genuinely progressive government to get us through this global recession must reject them all.

As we approach the most important general election for a generation, this is no time for introspection or defeatism. There's never been a moment when Labour's values and experience have been more relevant or necessary. The biggest global recession in our lifetimes has not only required unprecedented action, it has also shattered some of the assumptions the right have clung to for decades. Who would now dare claim that financial markets, left to their own devices, are efficient or inherently stabilising? Or that financial market regulation is always to be reduced wherever possible?

The global financial crisis of the past year has underlined the importance of our defining philosophy: while markets are powerful drivers of growth and innovation, there is a vital role for the state in making sure they work fairly and in the public interest. The supposedly modern and "progressive" Conservative Party has opposed every action we have taken to support the economy. As Alan Johnson said last weekend, it was the call of the century whether to intervene to stop recession turning to depression - and David Cameron and George Osborne got it wrong.

Where you are on the political spectrum is ultimately defined by two things - your view of what constitutes social justice, and your view of the role of the state in delivering fair outcomes. The stark contrast between the Tories' inaction and calls for spending cuts now, and the way Gordon Brown and Alistair Darling have led the world in dealing with the downturn and supporting families, is why I say Labour is clearer about the modern role for the state in delivering fair outcomes than ever.

I don't see our approach today as a wrenching change from the past. New Labour was never about a wholesale embrace of free-market individualism. We always knew that markets should be servants not our masters, that we had to tackle vested interests, that there is a role for government in delivering social justice. That was the essence of the new Clause Four. Look at the radical things we did in the early years: from the minimum wage and the windfall tax to the creation of a single statutory regulator for financial services. But we were also right to strike a careful balance by supporting the market economy and recognising the state can sometimes be part of the problem as well as part of the solution.

So, just as we rejected the heavy-handed anti-individual collectivism of early 1980s Bennite Labour, we were also right to support open markets and champion a tough competition policy as well as proper voice and choice for users of public services. We did not always strike this balance right. In public-service reform, we sometimes sounded as though private-sector solutions were always more efficient; and who can now doubt that, despite the tougher measures we brought in, financial regulation was not tough enough?

We need to continue to get this balance right as we prepare our manifesto - and be clear about the limits of but also the proper role for government. Of course, policy debates, external challenge and new ideas - in the pages of this magazine and from think tanks - are essential, especially after 12 years of government. But we don't need think tanks to work out that there is a false choice between heavy-handed statism which does not respect individual choices and a so-called progressive liberalism that sees the state as the enemy of individual freedom and is just conservatism with the label "progressive" erroneously shoved in front.

Yet while the clear differences between the parties on the economy are well understood, commentators are still claiming we're all the same on tax and spending. This poses a challenge. It's going to be tougher on spending in the coming years - all countries need to get borrowing and the debt ratio down steadily, as the Chancellor set out in the Budget.

But where we have to make tough choices, and where some things have to be cut back, we must do so in a fair and Labour way - because the financial excesses of a few should not be paid for by damaging cuts to front-line public services for the many. On tax, the Tories are also in a fundamentally different place. They oppose our National Insurance rise and higher top rate of tax, and want an inheritance tax cut for the wealthiest. So even before they've started reducing borrowing, the Tories need to find billions every year just to keep deficit reduction on track. This Tory position is not simply about tackling the deficit. It's about ideology, too. Which is why Osborne cannot hide his relish for the deep and immediate spending cuts the Tories propose.

The ideological divide between the two parties - on policy, values, the role of the state - is now wider than at any time since the Thatcherite 1980s. And when the policies and underlying philosophies of the parties are scrutinised - on spending, Europe and education - we can and will expose Cameron Conservatism to be as out of touch and unsuited for these times as Labour was in 1979.We face an election with a choice as stark and vital for Britain's future as 1945 or 1997.

We have to be more determined in setting out the choice and taking the fight to the Tories - not just on the economy, but on tax and spending, too.This is not the time to buy the Tory spin that the election's already lost and throw in the towel. We face the fight of our lives - and Britain faces a choice of huge importance. We can and must win this fight, and ensure that our country makes the progressive choice.

Ed Balls is Labour and Co-operative MP for Normanton and Secretary of State for Children, Schools and Families