Last month the British people went to the polls and gave the Labour party a hammering. Some expected defeat, but few expected a Tory majority, not even the Tories themselves according to senior cabinet ministers I’ve spoken to.

The reasons are many and varied and, in the immediate wake of our defeat, people have naturally made arguments that suit their particular political perspectives. But whether you thought our offer was insufficiently “radical” (whatever radical means) or you thought it was insufficiently anchored in the centre ground, most agree that our perceived lack of competence severely compromised our ability to gain the support needed.

As Prof John Curtice, the psephologist who came closest to predicting the result, said last week at a gathering brought together by Kent University to explore how Labour might win again, that it was concern about our ability to provide competent government – aside from any considerations of ideological positioning – that did most to deny us office. This was particularly so among older voters, who vote in greater numbers, and among whom support for Labour since 2010 dropped by eight points according to Ipsos Mori. And, even if voters did not believe the economy had improved under the Tories, too few believed it would get any better under Labour.

As painful as it is, the claim that Labour spent too much and “maxed out the credit card” clearly stuck. However ridiculous it is to compare managing household finances to government finances, we do not need the pollsters to tell us this: we all heard these claims parroted back at us on the doorstep. So, to have any hope of addressing the competence issue, we must strategically address these claims on our fiscal competence, while presenting a credible and clear alternative for the future. This is a prerequisite to getting a hearing on what the future needs of our economy are. It involves conceding where we went wrong and defending our record in an appropriate way.

We should start by acknowledging that we should not have been running a small but historically unremarkable deficit

Some economists reject this approach as it would, in their view, necessarily entail simply capitulating at the feet of George Osborne. In their view all we need to do is – in ever more strident and louder terms – shout back at the electorate that it was not profligacy on the part of the last Labour government that caused the crash, but a banking crisis. And, in respect of borrowing, far from acknowledging that we understand the need to reduce national debt, we need to enthusiastically go about making complex arguments for different types of borrowing. Do this and the public will see the light.

Well, the harsh political reality is that the electorate rejected this. Screaming “you’re wrong” at the electorate is not a good strategy for a party seeking to win back its trust. Nor does it mean saying that the Tories were or are right, which I am not aware any Labour leadership candidate is doing. That would make us look foolish. But at the very least, we must start by meeting the voters where they are, not where we would like them to be. That is the first step on a journey to taking the national economic debate in a more progressive direction, much more focused on the real economy. There is no short cut, no easy political route out of our current predicament.

So, yes, we should start by acknowledging that, in hindsight, after 15 years of economic expansion, we should not have been running a small but historically unremarkable deficit going into the 2008/9 crash. All of the candidates – save for Jeremy Corbyn – in our leadership contest have rightly done this. To do so is not to indulge in Osborne’s deficit fetishism, nor is it to agree with the subsequent 2010 deficit reduction plan which he set himself and then failed to meet. In the end, the path he was forced to follow was more akin to that set out by his predecessor, Alistair Darling.

Likewise it is not “Tory lite” to argue that, in the long term, it would be better not to continue with a situation where we spend more every year paying debt interest to City speculators and investors who hold government debt, than we spend on housing, transport or education. Does this mean there is never a case for running a deficit? No, of course not.

Mervyn King, Gordon Brown and Alistair Darling. Photograph: Pool/Reuters

But to set our face against the very notion of ever running a surplus would not be sensible for a party trying to illustrate that it – like the electorate – thinks national debt (forecast to be 80.2% of GDP this year) must be brought down. To be clear, aiming to reduce the national debt in the long term and running small surpluses when the economy is operating close to full capacity is what I mean when I talk about seeking to “balance the books” – a sensible approach.

Osborne wants to legislate to make surpluses a legal requirement in “normal times” but has failed to define what that means. He previously described an attempt in 2010 to enshrine such strictures into law as “vacuous and irrelevant”. He will be challenged to explain this.

In the end, the key difference, between Labour and the Tories, aside from the pace of debt and deficit reduction, is this: for the chancellor, it is a means by which he can shrink the state; for Labour it is a means by which we can free resources to invest in people to help them succeed in an era of globalisation that has left too many behind. So the arguments doing the rounds on social media that to care about reducing debt is some Tory endeavour are both ludicrous and absurd.

Finally, it was plainly mistaken to run an economy with too few savings, too concentrated in too few sectors and regions of the UK, and too based around cheap credit – an economy with severe imbalances that had grown since the 1980s. The Tories made the same mistake (and continue to do so), but it left our economy exposed when the global financial crash came – unfortunately that crash happened on our watch.

We must be big enough to say all this not only because it is true, but because if we have the humility to make some concessions, we might get a better hearing when we turn to defending our record and arguing – as we should – that it was not profligacy on the part of the last Labour government that caused the global financial crash. We, after all, had reduced the national debt from the 42% of GDP in 1997 to 37% of GDP on the eve of the crash. Our response to the crash stopped many repossessions and saved many, many jobs.

More importantly, if we say all of this, people might be more willing to listen to the arguments we make now about the Tories’ current economic record. The recovery is here but painfully slow and has the same structural weaknesses after half a decade under a Tory chancellor. We have the worst productivity in the G7 save for Japan. The household savings ratio was just 6% in 2014, has fallen every year since 2010 and is now the lowest it’s been in over 40 years. The current account deficit was 5.5% of GDP in 2014 – the highest since 1948. Over the past year 70% of economic growth has come from private consumption growth. Output varies widely across the country. This is not a good record.

Tackling these imbalances goes far beyond simply managing the public finances sensibly. It requires a new kind of innovation economy in which productive businesses, the state, and citizens work together to create wealth and ensure that globalisation works for many more people in this country. And the “rollercoaster” speed of consolidation envisaged by Osborne in the first two years of this parliament will seriously hamper our ability to invest in the productive capacity of the nation. This is where we need to take the national economic debate – but first we must get permission to be heard.