It has been a miserable last few years for Europe’s centre-left – going into this month’s general election in Spain, only nine of the 28 member states and one in three of the European Union’s population have a government led by the centre-left, and where we are in power, like in France and Italy, the challenge from nationalists and populists to our electoral base is growing.

And yet, under the cover of moderate language and often co-opting centre-left ideas like a higher minimum wage, Europe’s centre-right is undertaking a radical transformation of the state. Under George Osborne’s plans, by the end of this parliament, public spending as a share of GDP will fall to 36.5 per cent of GDP. Forty-two per cent of all state spending will be on health and on the elderly. This has a political pay-off for Conservatives, with over-55s having strongly backed them in May’s general election, but at the cost of heightening generational inequality, one of the growing issues contemporary society faces.

As I know all too well, and as Jon Cruddas’ study has shown, Labour lost everywhere and to everybody this May – to the Tories in England, to the Scottish National party in Scotland, and lost vital votes to UKIP in marginal seats. We couldn’t buck the iron laws of electoral politics – if you trail the Tories on both leadership and economic competence, if you don’t offer a message of hope that is convincing to a wide enough slice of the British people, you lose a general election. Even before changes to constituency boundaries that may be devastating for Labour in a Commons reduced in size by 50 MPs, and no sign of electoral recovery in Scotland, Labour will need a lead of 13 per cent over the Tories in England and Wales, last achieved in 1997, to form a government with a majority of one seat in 2020.

It is daunting, but doable. There are big questions about Boris Johnson’s capabilities for the top job. Neither is George Osborne unbeatable. As prime minister, he would be the bruised decade-long incumbent not the change candidate in 2020. The electoral sweet spot is still for the party which can combine economic efficiency and social justice, higher living standards with social mobility. But to get there, we need to build a coalition stretching from aspirational voters who jumped ship from Labour to the Tories by 2010; to liberal, metropolitan, left-leaning voters, who have been particularly attracted by Corbyn’s leadership; and retaining our working class support particularly in and around smaller towns and cities. We need to have the will to win, a unifying purpose, a strong story of national renewal, and convincing, but inspiring policies.

What are the big ideas that can help us do it then? First, make tackling inequality front and centre in our efforts. In Britain, social mobility has gone into reverse, and by the time a child gets to school, the gap in life chances between children from the wealthiest and poorest backgrounds is already growing. From the US Federal Reserve to the OECD, the evidence is in. Higher inequality damages our long-term growth rate, and imposes larger costs on society. A rising minimum wage accompanied by a strong tax credit system, investment in childcare and the education of poorer pupils which raises our employment rate and skills levels will help greatly, but are not enough in themselves. We need to tackle asset inequality which is emerging as a key barrier to social mobility, and causes particular insecurity among younger voters. Low savings levels throw into sharp focus that in many parts of Britain, the dream of owning or even renting a home of our own is moving out of reach. Average two-bedroom property rents in London could rise to £2,000 per month within the next five years, and the average age at which buyers can find the deposit to get on the housing ladder is pushing 40. Working to help younger people and those in lower incomes to build assets, capital, and savings is critical if more people are to have a proper stake in the economy and the future.

Second, have a plan for future growth and jobs, and be credible on the public finances. Previous Labour governments were able to combine prudence with an inspiring vision of how working people would be better off with a modernised economy. There has been a surplus achieved eight times since the 1950s, four times under Labour governments. We should rebuild trust on public spending again by setting achievable rolling multi-year targets to firmly control day to day spending, ensure that every pound in a Labour spending review meets our goals of greater fairness, provide the country with sufficient fiscal headroom in case of future downturns, while making the case for additional capital and infrastructure investment. But if we do so, we need to show that this is supported by the National Infrastructure Commission (which Labour devised in the previous parliament), and crucially by the OBR, doing so only if we can show there are benefits for growth, employment, and the medium and long-term health of tax receipts and the public finances. Similarly, we need to raise the share of the economy invested in science, innovation and research, work with business to increase our levels of exports and tackle our country’s balance of payments problems, and make reforms on capital allowances for businesses and skills that boost productivity – the surest way to long-term rises in wages and living standards.

Third, reform the tax system to shift towards high value properties and land and away from taxing work. The tax credit time bomb has been delayed not defused. Low paid workers face a £3bn hit to incomes from 2020 if universal credit is rolled out as the government intends. The most invidious change is to work allowances – the amount of money you can earn before losing tax credit – which will severely damage work incentives for people moving from unemployment into low-paid jobs. But we also need to do even more to reflect the importance of work to Labour, the party of work. Alongside reversing the Tory tax credit changes in 2020, the other tax reform which helps low paid workers most is a reduction in an employees’ national insurance contributions – either by reducing the rate, or raising the threshold before which NICs are paid. As the Fabian Society’s recent commission has shown, reviewing the case for moving the tax base more towards high valuation land, and considering a lifetime capital gifts tax as a replacement for inheritance tax, are also areas where Labour can build popular support for a fairer tax system.

Fourth, deepen the roots of a more progressive capitalism in Labour’s values and policies. Re-regulating markets, improving access to finance for businesses through structural banking reform, promoting in company law the goal of long-term investment rather than maximising short-term shareholder value, and assessing the case for expanding collective bargaining in certain industries, is an agenda which can produce the economic circumstances where businesses thrive in the long run.

At heart, people want security and hope for the future. If we can show we have learned the lessons from our 2010 and 2015 defeats, and offer people the prospect of a Labour government that will be credible, unified and competent, taking long-term decisions to make them and the country fairer and stronger, history shows us victory in 2020 is possible.

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William Bain is former member of parliament for Glasgow North-east. He is speaking at tonight’s event The Future of Labour’s Centre-left: The Progress Grassroots Tour in Glasgow. He tweets @William_Bain