Immigration from Eastern Europe was under-estimated by the former Labour government and hit people’s wage packets, Ed Miliband acknowledged today.
The Labour leader said economic migration had been allowed to widen the gap between the rich and the poor.
In a speech, he admitted that the previous government had been “wrong” not to concentrate on the type of economy it was building.
“The story of the last two decades is of an economy divided between high-skill, high-productivity sectors and low-skill jobs,” he said.
“At the same time, economic migration and greater labour market flexibility have increased the pressure faced by those in lower skill work.”
He added: “There is a difference between our government and this one - we did take action through tax credits and other decisions to help families.
“But we were wrong not to focus more on the type of economy we were building and what that meant for the widening gulf between those at the very top and the rest.”
Taking questions afterwards, Mr Miliband said there was no doubt that managed migration contributes to the economy.
But he said: “We’ve got to look at the interaction of migration with, for example, flexible labour markets, because when you have the interaction of Eastern European migration and flexible labour markets there was pressure created on people’s wages.”
Mr Miliband added: “We were certainly wrong about the number of people who were going to come in, make no bones about it, because I think we under-estimated significantly the number of people who were going to come in from Eastern Europe.”
Mr Miliband said that, despite “advances” under Labour, the economy was “not delivering” for many people, including increasing numbers of middle earners.
That was causing a “quiet crisis” in homes across the country, the Labour leader went on.
“For many decades rising prosperity benefited the bulk of the working people,” he said.
“But that assumption is breaking down. While those at the top have continued to do well, middle earners are no longer guaranteed to share in our nation’s success.
“The result is a quiet crisis that is unfolding day by day in kitchens and living rooms in every town, village and city up and down this country.”
Speaking at the launch of an independent inquiry into the plight of low and middle earners, Mr Miliband warned of “cost of living crisis” brought to a head by the Government’s “reckless” cuts.
“My fear is that because the Government is making the situation worse, the cost of living crisis for ordinary families in Britain will have a deep impact for years to come,” he said.
“Walk down any street - behind those front doors families are anxious about how they will get by over the next few years.
“Squeezed wages, squeezed prospects, squeezed aspirations.
“That is why the British Promise, that the next generation would always do better than the last, is now under threat like never before.”
Data from the Resolution Foundation suggests wages for low and middle earners have failed to keep pace with wider economic growth since the 1970s.
The Foundation said its findings - drawn from official data - suggested lower and middle earners were the victims of deeper economic factors than just the recession.
Mr Miliband said the previous government had done “a lot” on tax and benefits.
But he added: “What actually happened though, was we were not worrying about the structure of our economy.
“This goes back to the history of Labour politics, which is that we’ve been a lot focused on the welfare state, the tax system and what it can do, and of course that’s important, but there needs to be a wider focus on what is your economy actually doing, what is the structure and nature of your economy.
“By being more reliant for example on financial services, which tends to have very high rewards at the top, and not building a broad industrial base, we didn’t get those middle income jobs.”
The Labour leader said the main challenge was to build “a different sort of economy, with prosperity rooted in high productivity, high skill industries, creating quality jobs and a better quality of life”.
Business needed incentives to “break out of the low pay low skill cycle” without cutting jobs or sacrificing effectiveness, he said.
Mr Miliband offered a riposte to former business secretary Lord Mandelson who suggested in a preface to a new edition of his book yesterday that the Labour leader had yet to set out a major vision to rival David Cameron’s.
Challenged about Lord Mandelson’s oft-quoted remark that New Labour was intensely relaxed about people getting filthy rich, Mr Miliband said: “I don’t think we can be intensely relaxed about the filthy rich getting richer, as he put it, if we are seeing people’s living standards squeezed.
“I think he’s a writer not a quitter these days, but anyway...”
The Labour leader said he did not want to “get into an argie bargie” with the peer.
“He’s absolutely entitled to his views, he did great things for our party and he’s got interesting things to say,” he said.
“I don’t always agree with them.”