The former work and pensions secretary describes Blue Labour as the most interesting element of debate within the party

James Purnell, the former work and pensions secretary, is to call on Labour to rethink its approach to welfare, relying less on cash transfers and instead offering guarantees of jobs and access to housing.

He also proposes a revival of the contributory principle whereby a claimant's benefits are linked more closely to the amount they have put into the system. Describing "Blue Labour" as the most interesting element of the current debate within the party, he says it is central to understanding why the party lost so many voters – symbolised by Gillian Duffy, the Rochdale pensioner branded a bigot by Gordon Brown in the seminal moment of the 2010 general election. He is due to make his remarks at a speech in Australia on Saturday.

He claims that Blue Labour, a recent movement with the party launched by the social thinker and life peer Maurice Glasman, starts from the things that matter – "responsibility, love, loyalty, friendship, action and victory" – values that "used to be engraved upon Labour's heart".

"This roots politics back in people's lives and how they can pursue what they want. It's not that GDP or equality don't matter; just that they are not the right place to start." He argues that "Mrs Duffy and millions like her had good reason to be angry. It wasn't her gratitude problem. It was our ideological problem. "In the name of helping the poorest, we've thought too much about what people get out of society, and not enough about what they put in. Too much was to be solved from the centre."

Currently chairman of the Institute for Public Policy Research, Purnell approvingly quotes Duffy, saying: "There are too many people now who aren't vulnerable but they can claim and people who are vulnerable can't get to claim."

He claims many Labour voters were offended by the Labour government's conception of fairness: "They felt people were getting help who hadn't paid in. And they thought that people who needed protection weren't getting it. To convince them of the alternative, it is no good showing a graph demonstrating that Labour's tax and benefit changes benefited the poorest. It is an offence against relationships that had been committed – reciprocity and mutualism had broken down, and therefore trust has evaporated".

Setting out a vision of a new welfare state he says: "When people lost their job, they would want to get a proportion of their previous wages for a few months. If they hadn't found work, they would like to be guaranteed a job. That might sound fantastical, but it's what Germany and Britain did in the last recession. People would want a guarantee of housing, of a pension in retirement, of good parental leave and pay. That is the kind of welfare state that they would actually fight for, rather than treat with indifference."

He warns this kind of welfare state "might need to be funded out of the cash transfers and universal benefits they value much less and which are insufficient in times of need, but marginal when things are going well.

"Such a welfare state would explore how we can bring back the contributory principle – how what people get out relates better to what they put in. And it would say that people couldn't refuse to help themselves – that the job guarantee would also be a job requirement. If anyone turned it down, they would lose their benefits."

In his speech he seeks to draw a distinction between Labour and progressives, a phrase that appears to be a code for New Labour, a movement within which he was a central figure.

Labour, he contends, believes "markets were inherently unstable and exploitative. That Labour's role was to protect people from this by using the state and unions to reduce exploitation in good times, and to prevent or mop up crashes in bad."

Progressives, he said, revised this argument into "markets are the best way of generating wealth and tax revenues. Labour's role is to use those revenues to help people fulfil their aspirations, mainly by controlling the state and improving public services."

He summarises: "Labour emphasised protection, progressives majored on aspiration. Labour emphasised how markets could hurt people. Progressives talked about how they normally worked.

He argues: "When it turned out that markets could go spectacularly wrong, we were left looking a bit bananas because we'd said that could never happen. And, however good our stimulus measures were, we couldn't get credit for mopping up the mess we had told people they'd be insane to fear. We had said to our voters that markets worked. So, when a huge crash in financial markets occurred, we had no way of explaining to them what had just happened."

But he claims the progressive offer made by New Labour was failing people like Duffy before the credit crunch. It "operated outside her conception of fairness, and was too managerial. It was done to her, and wasn't what she'd asked for in the first place".