A gross yet useful simplification of the Labour Party is to divide it into two schools of thought. The first embodies working class self-interest, exemplified in the trade union movement for which the party owes its foundation. The second can be classed as ‘Liberal Labour’: the collection of middle class professionals whom whether for religious, philosophical or pseudo-scientific reasons decided that socialism was necessary for Britain.

Liberal Labour has a proud history within the party. In offering a model by which the proceeds of growth were used to finance social justice, politicians such as Anthony Crosland offered a compromise by which social justice could be married to the market economy. This allowed for a stance to develop that upheld the majority of the post-war social contract while allowing the creation of an electoral coalition that met the needs and aspirations of a rapidly changing society.

In modern times, though, the Labour leadership has stretched this model to the brink of destruction. Like any good political diatribe these days, this article blames the banks. Anthony Giddens famously noted: “the prawn cocktail offensive of '97 evolved into fawning dependence”. In relying on the City of London to finance public spending, the state became increasingly disconnected from ordinary citizens. Increases in welfare, health and education budgets came not from “our money and our taxes” but rather those of the hedge funds, private equity partnerships and brokerages in the Square Mile.

As such under Labour the state attempted to elevate itself from its duty of facilitating a social contract of rights and obligations. Instead New Labour saw City tax receipts as a charitable pot of gold to fund means-tested benefits, Surestart centres and expanded legal aid. Most importantly these projects were almost universally targeted at the most vulnerable, with the middle-income majority of voters neither paying nor benefiting from them.

It is the era of austerity that has made this consensus impossible. Taxation has been shifted from the financial sector to the ordinary citizen, with corporate revenues diminishing and government debt built up during the boom years now being called in. The Tories response has been efficient, effective and brutal. The welfare and justice budgets have been slashed, with the notable exception of the universal state pension.

In contrast Labour’s reaction has been too often to take the moral high ground. They argue that in implementing these cuts, the Conservatives represent the cowardly bully, picking the pockets of the most vulnerable before crawling back to their bigger, more powerful friends for approval. While the critique might have some merit, Labour is left doing little more than wagging an accusatory finger.

To the shock of many on the left, public opinion is firmly with the Conservatives. A more dynamic approach is needed.

To save these institutions requires the Labour leadership to re-imagine the welfare state, not as the pet project of altruistic politicians, but rather as a social contract designed to reap tangible benefits for all citizens in exchange for tangible contributions.

Only by re-aligning this Labour vision with the self-interest of voters will the welfare state survive. Rachel Reeves recently suggested that under a Labour government, unemployment benefit could become linked to National Insurance contributions. This is a small step in the right direction. But more could be done. New social housing opened to middle income groups; Surestart Centres being built in leafy suburbs.

If Ed Miliband wins the moral argument alone, he will lose the battle for the welfare state. Liberal Labour must be abandoned for a party that unashamedly represents the self-interest of low and middle-income families. There is only the low road to socialism, and it’s time that it was embraced.