Birmingham MP Liam Byrne launched a battle for the soul of the Labour Party as he warned that “moderates” needed to explain how they would cut inequality.

He insisted Labour leader Jeremy Corbyn’s ideas wouldn’t work, in a speech designed to lead a fight-back against the left.

It follows the September election of Mr Corbyn, a left-winger who opposed previous Labour leaders, which was seen as a disaster by some party MPs.

But Mr Byrne, Labour MP for Birmingham Hodge Hill and a former Chief Secretary to the Treasury, also admitted Labour moderates had failed to set out an attractive alternative.

He said the age of “new Labour” was over, and insisted: “I like Jeremy Corbyn.” But he said Mr Corbyn’s approach of “printing money, nationalising things, and spiralling public spending” will fail.

Mr Byrne delivered his speech at the premises of think tank Policy Network in London.

He said the gap between the rich and the poor was growing too fast, warning: “The richest five families in Britain now own more than the poorest 12 million of their fellow citizens. Since the crash, the number of billionaires here in Britain has doubled – while queues at the food bank are a 1 million people long.”

But he argued that Mr Corbyn didn’t have the answers, saying: “I like Jeremy Corbyn. I love his passion to challenge inequality. That idealism unites us.

“But I don’t think printing money, nationalising things and spiralling public spending is going to work. I think there’s a better, safer, faster way to challenge the inequality we both hate.”

Mr Byrne said Labour should work with employers to make society fairer – and criticised Mr Corbyn’s approach as “class war”.

He said: “We need to offer an approach based not on not class war, but building common good with business reformers.”

The MP said that the Bank of England should be tasked with cutting unemployment, rather than being told its priority was keeping inflation low as it is now.

MP Liam Byrne
MP Liam Byrne

And he said that “long term investors” should have more control over companies, to reduce the power of short-term investors who buy shares in firms only to strip them down and sell them again.

Mr Byrne also argued that every school should teach children about how to start and run a business.

Labour Shadow Chancellor John McDonnell, a close ally of Mr Corbyn, welcomed the speech.

He said on Twitter: “Told Liam Byrne last night that I welcome his speech today as contribution to our debate on economy, though repeats much of what I’ve been saying.”

The election of Jeremy Corbyn as Labour leader has split MPs.

Stoke Central Labour MP Tristram Hunt has warned Labour risks becoming a “sect” under Jeremy Corbyn.

He told Cambridge Universities Labour Club: “The Labour Party is in the s***.”

And Labour’s new leader was criticised when it emerged he had declined an invitation to speak at the annual conference of business organisation the CBI.

Tony Blair’s former special adviser, Alastair Campbell, was scathing about the decision, suggesting it would help clear the way for George Osborne to succeed David Cameron as prime minister.

He tweeted: “If Jeremy Corbyn is seriously saying he won’t put Labour’s case to the CBI we may as well just give Osborne the job now.”