A former minister has called on the Government to cut taxes in order to put money "into the pockets of hard working individuals".
Denis MacShane said the time had come for secretaries of state to "look at some of their costs" and ask if money was being spent in the right way.
And he warned that Labour had to "dominate the battle for ideas" against the Conservatives or it would hit serious trouble.
Speaking on the Today programme, Mr MacShane said Labour had to avoid the trap of choosing between the policies of the 1980s or continuing with New Labour ideas of 15 years ago and instead come up with new thinking.
He said: "I just think we need to re-tilt the balance a little bit to put more money into the pockets of hard working individuals at the lower end of the income scale.
"I would like to see the minimum wage go up as well and I think we just need to re-equilibrate the balance a little bit.
"There are two offers at the moment in front of the Labour party. One is to go back to the sort of Michael Foot 1980s, move sharply to the left, the other is to say there is no problem, just maintain Blairism, third way new Labour stuff from 15 years ago.
"I think we have to think about new ideas and new policies, and a bit less state, a bit more individual is where I would like to see Labour position itself."
Mr MacShane argued that managers in all walks of life had to ensure that they were getting value for money, and the government should be no exception.
He said: "I was speaking at a trade union conference yesterday and I pointed out that every general secretary in the last 10 years has had to cut costs to reform the way his union works and so has every manager of a successful company."