Finally it seems as though the steam-tanker of government is chugging towards an alternative channel. In coordinated speeches in the drumroll of the party conference season, Peter Mandelson and Alistair Darling part-resurrected Labour as a party of public service reform and economic competence. Darling managed to u-turn on the ‘no cuts’ dividing line which was not only wrong for the economy, but also implausible as a doorstep message. While Mandelson, in a much-reported speech for Progress, argued that ‘today’s challenges require us to accelerate the pace of reform’, signalling that the government has perhaps recaptured New Labour’s old sense of urgency in improving public services.

These two shifts put the party in a stronger position leading into Brighton’s conference, than before the summer. But the question is, where’s the meat? The Tories have had since June to prepare their answers, with shadow ministers mandated to earmark areas in their departmental responsibilities which could be for the chop. Three months later the chancellor has asked the same of his ministerial colleagues, but after 12 years in government, there may be a strong appetite to protect pet projects and enter into an undignified round of horsetrading. To avoid this, Labour must devise clear principles to underpin potential savings in public expenditure. This would also have the added benefit of providing new dividing lines with the Conservatives who are steadily morphing back into their former selves. And as Nick Clegg faces both directions at once with his talk of savage cuts and taxing the rich, Labour could hold firm to a message which promoted principled cuts against punitive cuts.

The business secretary set out the parameters of this new narrative thus: ‘Labour’s approach will be based on clear values and principles, in order to ensure social fairness, promote social mobility’. This would suggest that measures directed towards lifting children out of poverty, investing in the early years, and breaking the link between class background and future life course should be protected to a greater extent. Standalone programmes such as Sure Start, and the Child Trust Fund, are most at risk but should be defended because their effects will result in greater equality in the long-term. Extra effort, however, should be made to ensure that state spending is directed towards the most disadvantaged in society. For example, by ensuring that Children’s Centres focus their efforts on programmes which target hard to reach groups through outreach work, rather than providing programmes which appeal to middle-class parents. Or the Child Trust Fund could be streamlined so that only poorer families receive the benefit henceforth. As for means testing child benefit, perhaps a more innovative solution might be to keep the benefit universal so that it reaches the least well off parents without the need for means-testing but give the middle classes a waiver over their right to it. This nudge-style move could both save the exchequer cash and at the same time create a wider debate in society about the relative wealth of middle-class families compared to the most disadvantaged.

As we have argued in these pages before, progressives will also have to reassess certain spending priorities which will be painful politically, but may have to be taken in light of the recession. Trident, ID cards and public sector pensions are three which might need to be carefully re-considered. But simply protecting or rejecting current spending priorities will not be enough to provide Labour with a platform for governing in the future. This is why pursuing public service improvement remains important. The good news is that some steps we can take might save money too. Take individual budgets, for example, where research has shown that users were more likely buy in services at a cheaper cost than councils by using smaller agencies and family and friends. The introduction of education credits might also result in efficiency savings as money currently divided into different grants will instead have to be spent directly on each child instead of being eaten up by the whole school.

Similarly, Labour’s welfare to work pilots have shown that there is a cost-benefit in providing intensive support by the private and voluntary sectors to get people back into work. This is not only socially just – to ensure that everyone is given support by the state to make the most of their talents – but also helps to bring down the welfare bill. Greater devolution might also accrue savings. The introduction of ‘metro-mayors’ for big conurbations could be offset by the downgrading of regional development agencies, for example.

So it would be wrong to conclude that the recession spells the end of personalisation and innovation in public services because more money is required up front. Labour needs to make the argument that public service reform is both necessary to increase equality and social mobility and to make efficiency savings. But time is running out – we need to see some real commitment in the coming months to new reform initiatives to turn this temporary narrative into a programme for winning the next election.