David Miliband last night distanced himself from his old political patron, Tony Blair, after the former prime minister rocked the Labour party by coming close to endorsing the economic strategy of the Conservative-led coalition government.

As the Tories hailed Blair for supporting the government's controversial plans to eliminate Britain's fiscal deficit by 2015, the shadow foreign secretary insisted that only Labour had the right plans to cut the deficit.

"I am clear we must tackle the deficit, but we need to do it in a Labour way, that's why I would halve the deficit over four years," he said.

David Miliband spoke out after Blair concluded his memoirs with an attack on world leaders for following the financial crisis in 2008 with "deficit spending, heavy regulation … and jettisoning the reinvention of government in favour of the rehabilitation of government".

In a passage which prompted one member of the shadow cabinet to lambast Blair as "so right wing", Blair wrote: "If governments don't tackle deficits, the bill is footed by taxpayers, who fear big deficits now mean big taxes in the future, the prospect of which reduces confidence, investment and purchasing power. This then increases the risk of a prolonged slump."

The former prime minister offered some support for Alistair Darling, the former chancellor, who won a battle with Gordon Brown in government to pledge to halve the deficit in four years.

"Fiscal consolidation has to proceed with care," Blair wrote. "I agree entirely that a precipitate withdrawal of stimulus packages would be wrong."

But Blair wrote that Brown lost the election after abandoning New Labour by raising the top rate of tax to 50%, signalling a "return to tax and spend", and increasing national insurance to tackle the deficit. "We should have taken a New Labour way out of the economic crisis: kept direct taxes competitive, had a gradual rise in VAT and other indirect taxes to close the deficit, and used the crisis to push further and faster on reform," he wrote.

The Tories warmly welcomed Blair's remarks, which came in the postscript to his memoirs. Lady Warsi, the Tory chair, said: "The coalition government is winning the argument on cutting the deficit to get the economy moving. Now even Tony Blair has backed it … Tony Blair has also revealed the full extent of the last Labour government's failure – they failed to tackle the deficit, they failed to reform welfare and they failed to reform the NHS. Labour knew they were spending too much before the financial crisis but failed to do anything about it."

David Miliband, who is being portrayed as the heir to Blair by his opponents in the Labour leadership contest, moved quickly to reject the former prime minister's support for a VAT rise. "I oppose the rise in VAT because it's a regressive tax which hits the poorest the hardest, and under my deficit reduction plan those with the broadest shoulders would carry the biggest share of the burden," he said.

The shadow foreign secretary distanced himself from Blair in a Channel 4 News hustings debate last night which was aired as the former PM all but endorsed him for the leadership in a BBC interview.

"I am my own person," Miliband said. "I look forward to the day when Tony says he is a Milibandite rather than people asking me whether I am a Blairite."

His rivals used Blair's remarks on the deficit to highlight their differences with the former prime minister. Ed Miliband, the candidate most likely to defeat his brother, said: "New Labour's comfort zone offers no new answers for Labour or Britain's future. Tony was once a moderniser but I am now the candidate offering the change needed to reach out to the millions who lost trust in Labour."

Ed Balls, who says that Darling's deficit reduction plans could jeopardise the economic recovery, said: "Tony Blair has come out today and said he's basically supporting a Conservative-Liberal coalition policy, he's supporting the rise in VAT and cuts in public spending."

While Brown stayed silent, there were protests from his camp about Blair's book. Michael Dugher, his former spokesman who is now Labour MP for Barnsley East, told Radio 4's The World at One: "People forget, in 2005, particularly in the aftermath of the Iraq war, Tony Blair was quite unpopular in parts of the country and the party. Gordon Brown played a very significant role in the 2005 election victory."

The former deputy PM Lord Prescott warned that Labour faced years in the wilderness if it did not resolve its differences. He told the same programme: "The dangers are – as we saw with the Tories [after 1997] – that if the divisions continue and there is a suggestion that one [candidate] won't follow if the other is elected, that would be very, very damaging for us. It damaged Labour for 18 years, it damaged the Tories for 13 years."