Chris Mullin: Our party will only blossom again once we have exposed the Big Lie

If the Tories and their Lib Dem partners stick to their plans to lay waste to the public sector, there will be plenty of open goals to kick at

Whichever Miliband succeeds to the Labour throne later today, his first task will be to try to inject some honesty into the debate about the economy.

For months now, as a result of Labour's preoccupation with finding a new leader, the Tories and their Liberal Democrat allies have enjoyed a more or less free run. As a result, a lie (not a small lie, but a large one) has gained currency which, if not soon challenged, is in danger of becoming folklore. I refer, of course, to the oft-repeated assertion that our economic woes are all the fault of Gordon Brown and his government.

No speech on the economy by David Cameron, George Osborne or Nick Clegg has been complete without a reference to "the mess we inherited from Labour" or "Gordon Brown's debt". These dishonest phrases have been repeated so often that they are rarely challenged, even by less gullible interrogators.

The purpose is entirely cynical. It is to pretend that that economic crisis is a uniquely British phenomenon, that it grew out of Labour profligacy and can be put right only by drastic and immediate cuts in public spending. So the first task of a new Labour leader will be to rebut the lie. Point one – and this is so obvious that one should not have to make it, but alas memories are short – is that the crisis is global. (Even the Americans agree it started in America.)

Point two: most of the deficit was incurred while rescuing the economy from the folly of the bankers, derivative traders and hedge funders, few, if any, of whom are Labour voters.

Point three: at the time, albeit belatedly and reluctantly, George Osborne and the Tories went along with what was done to rescue the banks and stimulate the economy, so they are every bit as implicated in the deficit as the previous government.

In so far as we have been hit harder than many of our European competitors, that is because we have – and have had for decades – an economy disproportionately dependent on the activities of the alchemists in the City. To be sure, the previous government can be justifiably criticised for failing to curb their excesses, but one can only guess at the hysteria that would have been organised by the Tories and their friends had Labour attempted to tighten regulation of the financial sector at the height of the boom. "Light-touch regulation" was the mantra of the hour. Indeed, Osborne was still making speeches about the need for light-touch regulation long after it ceased to be fashionable. Quite apart from which, no amount of regulation would have protected us from the tsunami that came from America.

There will, of course, be those who argue that these points are so blindingly obvious, so banal that the new leader should waste no time on them, but instead attempt to lift his gaze and that of the nation to the far horizon. Unfortunately, however, the enemy has a head start. No rational discussion of the future is possible without clarifying the immediate past. This will need to be done repeatedly, not just by the leader but by his entire frontbench team. If there is one thing we surely learned from Mrs Thatcher, it is that repetition of simple messages can pay dividends.

Once the past has been clarified, we can have a rational discussion about the future. There are several points to be made about the deficit. To be sure, it is huge, but not as huge as once feared: 12 months ago the Treasury was predicting a deficit of £177bn; the last forecast I have seen was £155bn. Second, properly handled, the sale of the public stake in the banks should net the taxpayer a healthy profit. Third, far from being caused by Labour profligacy, one of the main causes was a sudden shrinkage of revenue from taxation caused by the recession; the end of the recession should see an increase in tax revenue (unless, of course George Osborne and his Lib Dem playmates organise a double dip).

Yes, there must be cuts and the new Labour leader must not fall into the trap of mindlessly opposing all cuts, whatever the pressure from below. There is, however, scope for argument about how far, how fast and what proportion of the deficit should be addressed by increased taxation.

Taxation will be a difficult challenge for the new leader. In recent years the great British public has been led to believe that it can have European levels of public services and American levels of taxation. All parties have connived at this. The basic rate of income tax is now far lower than it was in Mrs Thatcher's day. Gordon Brown's greatest folly, in his final budget as Chancellor, was to cut two pence – at a cost to the Treasury of £8bn a year recurring – off the basic rate in return for a cheap round of applause that faded within 24 hours. It's time Labour stopped trying to outbid the Tories on taxes. And stop talking about the tax "burden". The new leader should say loud and clear that taxation, fairly raised and efficiently used, is the subscription we pay for a civilised society.

There is everything to play for. If the Tories and their Lib Dem partners stick to their plans to lay waste to the public sector, there will be plenty of open goals to kick at. What rankles is the apparent glee which George Osborne and certain of his colleagues (Eric Pickles to name but one) are setting about it. There is a suspicion – and this needs smoking out – that they are using the crisis as an excuse to do what they have always dreamed of doing. The current generation of Tories, remember, are children of Thatcher. For them the Eighties was a golden age. As for the notion that "we are all in this together", that is, frankly, risible.

One last point. No breast beating. The new leader must not allow the myth to take hold that little or nothing was achieved on Labour's watch. I represented one of the poorer areas of the country for 23 years and, hand on heart, I can say that the lives of most of my least prosperous constituents improved immeasurably during the past 13 years.

One example will suffice. There is a secondary school in Sunderland called Sandhill View where, in the early Nineties, less than 10 per cent of pupils were leaving with the standard five A to C GCSE grades. Under Labour, the school was completely rebuilt; there is a dynamic new management and now just under 80 per cent leave with five A to Cs. And, yes, the catchment area is exactly the same. Labour governments do make a difference and the new leader should never hesitate to say so.

Chris Mullin was the MP for Sunderland South from 1987 to 2010. The second volume of his diaries, 'Decline & Fall', was published earlier this month