Christian Guy: The Right represents change. The Left, the status quo. Miliband must change this now.

Christian Guy is Director of the Centre for Social Justice. Follow Christian on Twitter.

In the 21 months between now and May 2015, Labour's biggest challenge is to win economic credibility in the hearts and minds of the British people.

The argument that Labour lost control of spending, and ignored a cavalier culture in the City, has resonated in living rooms, playgrounds and pubs across the country. Polling regularly finds them lagging behind the Conservatives on economic trust and no matter how passionately they protest, little is changing in the public’s eye.

Yet for Labour, if this wake-up call on credibility is to prove truly significant, it should transform much more than the party’s headline economic commitments. Yes, Labour needs to present a credible plan for public spending in the context of deficit reduction. But if the Labour leadership is to get right to the heart of its present challenge, it should also review how, why, and where Labour spends taxpayers’ money, not just how much it spends.

Take the debate about poverty as an example. I have written here previously about the need for new Conservative approaches to social justice, but there remains a reluctance on the Left to come to terms with a number of the things that ravage the poorest neighbourhoods too. This represents a stark disconnection from the people the Labour party says it was established to serve.

Take the south London housing estate I visited last week. Gang warfare – fuelled amongst other things by chaotic families, worklessness, and low aspiration – has become a fact of life for residents. ‘Stabbings and shootings happen every day but unless someone dies they never make the news’, one former gang leader told me. ‘You can buy a clean gun for £2,500’, he said, ‘but they’re much cheaper if they’ve got bodies on them’.  Gang members would police the estate’s borders and control who came in and out – using what they described as ‘passports’ to travel. Some earn £5,000 a day.

With very few positive male role models, illicit substances flowing like a river, crime and overcrowded housing, life is precarious for local people. Westminster, only a few miles away, feels like a different planet when you walk those streets.

That besieged estate is no extreme. In recent CSJ/YouGov polling, 55 per cent of people said that at least one of their local communities is plagued by broken families, crime and poor schools. Nationally we know that one million children have no meaningful contact with their father, more have a drug or alcohol-addicted parent, and record numbers are being taken into care. The working age welfare bill for London alone is £36 billion a year – other cities are well into the billions too – and local job markets are volatile. Every day 56,000 pupils play truant and unmanageable debt rips families apart. Countless people are stepping in to turn things around in their communities but the list of issues, and the vast public spending required to pick up the pieces, goes on.

Conservatives have begun to engage with these areas in new ways, but what is Labour’s offer? The hard fact that the Left must wrestle with is that many of these estates are ‘Labour areas’, and have been left to rot for decades. The people there know it.

So Labour has to adjust quickly – heart and mind. Talk to people in the toughest parts of the UK, and many feel as abandoned by the modern Labour party as they do by all the others. This is because for decades many on the Left have argued that this social breakdown comes down to low income, and that the welfare state offers the surest way out of deprivation. This has given rise to ever-increasing benefit cheques and narrow ‘poverty-line’ politics. But too little has changed in these postcodes.

Wearily, Labour MP David Lammy sums it up in his book Out of the Ashes. He recalls a conversation with Gordon Brown in No.10. When the MP for Tottenham raised concerns about knife crime, absent fathers, and parents not coping, the then Prime Minister simply said "don’t worry, they’ll get tax credits", patted him on the arm, and ended the conversation.

Of course income matters, but the broken parts of our society, plagued by many problems, should be transformed with many tools, not just a faceless welfare state. If mass public spending was the answer then poverty would be a problem of the past. Labour has to wake up to this for the sake of its credibility in the poorest parts of the UK. It needs to focus on radical but realistic things that will turn lives around. Here are three areas they should focus on.

Welfare reform: Temporarily famous for its ‘education, education, education’ mantra, Labour’s new focus should be ‘work, work, work’. The current welfare settlement isn’t credible any longer and the British people know it. Welfare has become a damaging and expensive way of life for too many who, with the right support and opportunities, could be free from it.

This is incredibly difficult for Labour to accept for all kinds of reasons. But given the way that the system has come to trap people in poverty, and the urgent need to bring more private sector employment to our economic coldspots, Ed Miliband should focus relentlessly on work, not welfare, as the greatest transformational tool at his disposal.           

Family breakdown: Some on the Left don’t believe family breakdown matters, and more consider family structures irrelevant. Worryingly, many also reject the idea that instability at home causes poverty or social problems. This has to change. Family breakdown is shockingly high and wreaks havoc on estates like the one in south London. Much evidence points to couple formation and marriage as stabilising factors, bulwarks against life’s inevitable shocks. So Labour needs to take a deep breath, have the debate, and develop a plan for family stability – not just family giveaways.  

Education:  Labour has been out-gunned on education. Its core challenge now though, in terms of social justice, is to find a way of closing the tragic and expensive 'truanting – exclusion – crime – welfare' path that so many young people in our communities walk. This means ideas for learning and skills that build aspiration and employability. Robust, ambitious, and rigorous education as a driver of social mobility would make a radical difference to people’s lives.

More broadly Labour should also recognise that voluntary groups and the private sector can achieve what the State cannot. Sensible thinkers like Jon Cruddas, David Blunkett and Lord Glasman get that, but they cut lonely figures at times.

The Labour Party still often occupies the social justice territory un-opposed. That is a mistake Conservatives are beginning to wake up to. Life has been tough for decades and people feel voiceless. They feel there has been political failure, including during 13 years under Labour.

In 2012 Labour’s conference slogan was Rebuilding Britain, but until now they have refused to acknowledge that parts of it are broken. On welfare, education, and families, like or loathe the policies, it is the Right which now represents change, and the Left the status quo. For those living on the numerous estates like the one I visited in south London, Labour’s credibility is on the line like never before.