Lisa Nandy has become embroiled in a row with Tony Blair after she accused the former Labour prime minister of pursuing Thatcherite policies.

As the Wigan MP on Wednesday reached the final stage of the leadership contest, she was criticised by senior party moderates for claiming that New Labour had tried to be as tight as the Tories” on welfare.

Speaking in Central London, Ms Nandy said she would pursue a “progressive” taxation system which would see capital gains and corporation tax rates hiked to “match those on earnings”.

She also took aim at past Labour administrations for “tacitly” accepting that “economic conservatism was a bigger priority than people”, adding that it was only under Jeremy Corbyn that the party “broke with this consensus”.

Hitting back, the Tony Blair Institute said that “any assertion that the last Labour government was a continuation of the Thatcher era is bad politics and worse history.”

In a statement posted online, it added that the period between 1997 and 2010 saw “huge improvements in Britain’s public services, with millions lifted out of poverty and radical changes made to the lives of many, for the better.”