To go from polling 29 per cent to 45 per cent in ten months is impressive going even if we know that 45 per cent figure would not be reached if an election were held next month. If nothing else, it shows that the Labour ‘brand’ is not as toxic as the Tory brand was from the mid-90s until Cameron’s election. Besides, the first year after an election defeat you’re not expected to have a detailed set of policies. The art of opposition is to ‘oppose, propose and depose’. So far we’ve been effective doing the first and, provided we campaign and get our vote out, the May elections will produce Labour governments in Scotland and Wales and countless new councillors and Labour-run councils.

But the stance of ‘not being the government’ will only work for so long. It won’t win us the next election. David Chaplin is right that Labour needs to start providing an economic alternative to the government. Our policy book is undeniably bare and this is an effective attack line of the Tories and Lib Dems. Labour is offering very few alternative ideas. Martin Kettle raised this point in the Guardian recently, noting that the huge majority in Barnsley showed that Labour’s election machine was still running well but posing the big question which Labour must answer: what is our alternative that will define the next election?

Surprisingly, I think Labour would do well to listen to recent statements by Bank of England Governor Mervyn King. Unlike the government, neither King nor Adair Turner of the Financial Services Authority are happy with the ‘business as usual’ attitude taken by the City. Turner even supports a financial transaction tax, which was backed by the European parliament last week.

Meanwhile, King’s most important remarks have been about Britain’s economic future. Last week he told the Treasury Select Committee that the levels of economic output and tax revenues created by the financial sector in the 1990s and most of the last decade were gone and would probably never come back. He went on to say that, as a result of the crisis and the cuts, living standards were unlikely to recover quickly.

In other words, the era of economic reliance on the City, which began with the Thatcher deregulation of the 1980s and was continued by Labour, is over. The ‘business as usual’ mantra supported by the Tory-led government will lead to stagnation or, even worse, another economic crisis. If we are going to see sustainable economic growth then we need to rebalance our economy. That will be the challenge of the next decade or even generation. It should start with Osborne’s budget but it won’t until there is a Labour government.

There are several reasons for this. The Tories have vested interests in keeping the Square Mile as Britain’s economic centrepiece. They liberalised the financial sector in the 1980s and it is where most of their funding comes from. Secondly, while their proposed new ‘enterprise zones’ are not an intrinsically bad idea, like the vacuous ‘Big Society’ they need more than £100m and some warm words. As we have seen with the ‘Project Merlin’ fiasco, the Tories don’t want to reform the financial sector. Despite the obvious need to break up the retail and investment arms of our banks, another demand of Governor King, if the Vickers Commission proposes this it is inconceivable that Osborne would do it.

So Labour must be the party that offers a programme of economic reform. In this we should look at other successful advanced economies – the likes of Germany, Japan and the Nordic countries. They are rich with high living standards for the simple reason that they are good at making things that other people want. They also have a much smaller gap between rich and poor. There is no reason why we can’t do the same. Although it has been run down by successive governments, we retain a manufacturing base that can be built upon and has the capacity to create millions of new jobs. For example, the Nissan car plant in Sunderland is one of the most competitive and successful in Europe. The trick is for employers to care about their workers. That is how, despite relatively low pay, the Nissan workers in Sunderland are so productive. The plant’s management involves the workers in the way they produce the cars, how they could be more efficient and productive, and looks at ways to improve working conditions. It’s a great model of corporate social responsibility which may sound like business jargon, but when done properly actually works.

In fact, I’m surprised Labour hasn’t made more out of the fact that manufacturing is actually where the UK has performed best over the past year. We have had a weak pound since 2008, yet manufacturing only started to increase when Labour invested in more apprenticeships and training as part of the stimulus measures. As a result, output is up 6.8 per cent over the last year. The last time manufacturing output in the UK increased as rapidly as it did in 2010 was in 1994, two years after we dropped out of the EU’s exchange rate mechanism and the cheap pound gave a boost to the competitiveness of UK manufacturing.

We must also become the research centre of Europe. Britain has the best universities in Europe, but lags behind on research and development and in copyrighting patents. In fact, per capita we produce among the fewest patents in the EU when, with unrivalled university research facilities, we should produce the most. Instead of effectively squandering billions each year by failing to utilise these resources, targeted investment would reap massive returns from relatively little investment.

This is not to say that Britain should abandon the financial sector. On the contrary, aside from the recklessness of a minority of incompetent cowboys, the City’s reputation and position as a financial hub is because Britain is good at providing financial services. It should remain a vital source of sustainable revenue, but not the centre around which the rest of Britain revolves. The era of casino capitalism is gone just as the era of nationalisation did before it.

One thing is for sure. Britain’s economic model of the past 25 years is broken and we are the only party that has the ability and political will to make a new one. We should not assume that in four years the economic picture will be rosy. Our banks are still, despite the massive public bail-outs, exposed to around £180bn of sovereign debt in Spain and Ireland alone – both of whom are in desperate difficulty. The next election will be about the economy and about what sort of economy we want to have. So from today until the next election Labour’s slogan should be simple. To paraphrase Bill Clinton – ‘It’s the real economy – stupid!’

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