Labour leader Ed Miliband will tell the party's national policy forum that the party cannot revert to its traditional high-spending approach to social and economic problems if it wins next year's general election.
Mr Miliband will tell activists at the three-day event in Milton Keynes that higher spending is not the answer to the country's issues, as "you and I know we won't have the money".
"Higher spending is not the answer to the economic problem that we together have identified. Unless we fundamentally reshape our economy, we will only be able to compensate people for inequality and unfairness," Mr Miliband is expected to say.
He will also argue that Labour must be "more ambitious" in reforming areas including banks, energy markets, skills, housing and pay.
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