“Tax is not an evil,” Labour leadership Lisa Nandy has argued in a speech this morning focussed on exploring the future of the welfare state and creating a “genuinely empowering” social security system.

Setting out her ideas at leading homelessness charity Centrepoint, where she used to work as a 23-year-old, Nandy called for a change in the debate over tax in Britain as well as a plan to save the “broken” welfare set-up.

The leadership hopeful argued that while Labour’s labelling of a government change to housing benefit entitlement as the bedroom tax’ successfully “caught the public’s imagination”, it also “reinforced the idea that tax is bad”.

She explained: “We won the battle, but lost the war. To win the argument, tax must first be based on principles of fairness – every time a company avoids corporation tax, or we allow a cut to the well-off at the expense of those in greater need, we chip away at the system and people’s trust in it.

“The case for change starts now. This has been a shattering defeat for Labour but it is a reminder that defending the status quo has never paved our route to power. We will not wait for permission to make change in 2024.”

Nandy described the Labour whip to abstain on the second reading of the Welfare Reform Bill in 2015, under Harriet Harman as acting leader, as “the symbolic moment when Labour lost its way”. On maternity leave at the time, she did not vote but spoke out against the move.

“I knew I had to break with the party leadership. For five years, too many of the people I represent had been ground down by the daily anxiety that comes with life in poverty,” she said, adding that “Labour values” must “permeate” the welfare state.

The UK’s social security system is “in real trouble”, Nandy declared today, contrasting the “pioneering” Beveridge report that was crucial to the founding of the welfare state with the current “declining ambition for change”.

Nandy asserted: “We have to do more than defend a broken system from attack. We change, or we die. And for the sake of so many, for ourselves, we can never allow that to happen. The challenge of today is clear: we build on the shoulders of giants to create a modern, empowering welfare state for the 21st century.

“80 years after that landmark moment when the Beveridge report lit a path to the NHS and the most radical concept of a social security system, too many people still face the five evils Beveridge sought to address.

“Under my leadership, Labour will not seek to simply meet the aspirations of 80 years ago but to recover the ambition of the Beveridge era for today. The challenges facing each generation shift and change.

“While Beveridge sought to address the issue of temporary unemployment, today we face the moral outrage of those who work facing systemic poverty. But the Labour I believe in has never been the party of the status quo. We challenge ourselves to always do better, to always advance human progress.”

Referring to specific cases, such as her constituent who “was sanctioned for going to his mum’s funeral” and “felt humiliated” by having to use a food bank, the Labour leadership candidate said: “Millions of people live hand to mouth, barely surviving. It is dehumanising.”

She told Centrepoint that the country had “allowed the values of the market” to dominate the functioning of the welfare state, adding: “Surely the question is how people can be enabled to contribute to our collective wellbeing, not how much of a drain they are from it?”

Criticising the “narrative” on social security, Nandy concluded: “We believe they want draconian welfare rules, when in fact they want the worst off to be cared for. Our job is to convince people it isn’t a zero-sum game.”

Her proposed solutions include making sure that large employers who “turn a profit and don’t pay the living wage” should first “settle their balance” with the Department for Work and Pensions every year.

“Equally, we should champion those employers who pay their taxes, invest in their staff and engage meaningfully in their community. This is not just about financial sustainability. It’s about making your contribution. And showing respect for the contribution workers make,” Nandy said.

The contender has made progress in Labour’s leadership race over recent days, gaining the nomination of large trade union GMB as well as the NUM, which means she needs just one more affiliate group to secure a place on the ballot paper.

She has also been endorsed by Jess Phillips, who revealed she would be putting Nandy as her first preference after dropping out of the contest on Tuesday afternoon.