Miliband warns UK may 'sleepwalk back into crisis'

Labour leader Ed Miliband warned today that Britain risked "sleepwalking" back into catastrophe without major changes in the management of the economy.

In his first speech to business leaders since his election last month, he told the CBI that the Government needed to learn the lessons of the financial crisis.

That meant introducing a new system of financial regulation, rebalancing the economy and ensuring that everybody was able to make "a decent living".

"Without profound change in the way we manage our economy it seems to me we are at risk of at best sleepwalking back to an economy with the same risks as we saw before the recession hit," he said.

Mr Miliband, dubbed "Red Ed" by his critics, insisted he would take forward New Labour's pro-business approach, but modified to take account of changing times.

"In the 1990s, New Labour changed its approach to business. It recognised the role of wealth creation as well as the distribution of wealth.

"It recognised the centrality of economic efficiency alongside social justice, and it recognised also that Government and business working together in partnership was the best way forward for our country.

"I want to take forward all of these insights into the future relationship that we have together."

But he said that the "world has changed", that being pro-business required something different now compared with the 1990s.

He warned that the Government's approach to the deficit, with £81 billion of spending cuts to eliminate the structural deficit within four years, was a "big gamble".

Mr Miliband insisted that it was not enough to assume that "all else will flow" from deficit reduction.

"I honestly have to tell this audience I fear that that is a big gamble with growth and jobs," he said.

"Even more importantly, it doesn't address the deeper risks and flaws in our economy.

"I think to think that deficit reduction is the only answer for our economy is actually to be quite pessimistic about what our economy can achieve.

"I believe we need to take a different and more optimistic approach, an approach that sees deficit reduction as a start not an end and is willing to learn the more profound lessons of the crisis.

"It's only this that will truly serve the interests of British business, it's only this that will insulate business from the risks that are part and parcel of the financial services industry, it's only this that will support the creation of British businesses that can lead in the global economy of tomorrow.

"It's only this that can provide fairness, prosperity and economic stability.

"That is what I believe it means to be pro-business in the wake of the financial crisis. It is the pro-business approach I will adopt."

CBI director general Richard Lambert said: "This was a well-judged speech for a business audience, which acknowledged the critical role of entrepreneurs and small businesses.

"Although Mr Miliband recognised the importance of cuts, he disagreed with Government on the pace. The CBI firmly believes that the budget deficit must be tackled during the lifetime of this Parliament."