Alistair Darling attacks Gordon Brown's election failures

The former chancellor will use the Donald Dewar Memorial Lecture to set out a staunch defence of his handling of the economic crisis, while at the same time criticising the failure of his party colleagues to tackle the question of how to cut the UK's vast budget deficit.

Mr Darling, who has announced he will step down from frontline politics after a new Labour leader is elected next month, will claim his party counterparts "lost their way" in the election campaign, in the latest broadside against the direction pursued by the party hierarchy in the run-up to the May poll.

In a pointed reference to Mr Brown's mantra of "investment over cuts", he will use the same phrase to illustrate how he believes the party lost the support of the electorate. He will say: "Labour lost because we failed to persuade the country that we had a plan for the future. What is important now for our party is we take stock and be honest about what went wrong.

"We rather lost our way. Rather than recognising that the public were rightly concerned about the level of borrowing, we got sidetracked into a debate about investment over cuts.

"By failing to talk openly about the deficit, and our tough plans to halve it within four years, we vacated the crucial space to make the case for the positive role government can play.

"You will only convince people you've got the answers if they believe you know what the question is in the first place. You can't have political credibility without economic credibility."

Mr Darling will use today's lecture, which is to be held at the Edinburgh Book Festival, to further defend his stance and pin the blame for Labour's election defeat squarely on the shoulders of his former boss and allies. Amid a raft of electoral advice to the leadership candidates, as well as some pointers to Scottish Labour as it looks forward to next year's Holyrood elections, Mr Darling will seek to protect his political legacy by maintaining he had been unwilling to put narrow political interest before the tough decisions needed to slash the country's ballooning public debt.

The Edinburgh MP will say: "For the avoidance of doubt, I believe we handled the financial crisis of the past few years with competence, integrity and above all an absolute determination on my part not to put short-term political advantage before the interests of the country and, specifically, of risking a second period of recession."

In apparent criticism of Labour at Westminster and Holyrood, where the party is led by his former special adviser Iain Gray, Mr Darling will say the party cannot simply ignore the deficit when opposing cuts.

"Warn, as I have tonight against the Tory gamble with people's jobs and livelihoods, but accept the need to cut the deficit," he will say.

"Yes, criticise the government for doing it too quickly and with too much enthusiasm. But let's not pretend that somehow that we can just ignore it. If we do, we will lose the crucial argument that you can reduce borrowing fairly, while supporting jobs and investing in the key areas of the future."

In the run-up to the final budget before the election, Mr Brown tried to sack Mr Darling and replace him with current leadership candidate Ed Balls after he refused to co-operate with him in setting out a "giveaway" package of measures designed to lure voters back to Labour.

The ex-chancellor later revealed that a frank assessment of the poor state of the UK's economy given in an interview had led to the "forces of hell" being unleashed by Downing Street.

Last month, Lord Mandelson revealed that during the campaign Mr Darling wanted to commit Labour to a VAT rise as part of a tougher set of measures to be put before the electorate in a bid to be more realistic about the deficit. According to the peer, it was vetoed by Mr Brown, who was said to be fearful of the electoral consequences.

Mr Darling, who has given his backing to David Miliband for the Labour leadership, will use the lecture to outline the direction he believes the party should take under its new leader after they are elected next month.

He will call on the new shadow cabinet to deflect suggestions made by the coalition government that the savage budget cuts are as a result of Labour's mismanagement of the economy.

And, in response to recent attacks made by the leadership candidates on certain Labour policies, he will urge all of the party's politicians to defend his government's record.

He will also warn the candidates they should focus less on internal party debates and more on attempting to entice back the millions of voters that deserted the party in May.

"Far from joining in with our opponents in trashing our record, all Labour's leadership candidates should stand up for it," he will say.

"For the calls we made in the recession. For the dramatic improvements in public services we delivered. For the fairness we entrenched through the minimum wage, increased help for pensioners and children and families. For constitutional reform and civil partnerships.

"But as well as being less defensive, we have to guard against talking, as I fear is becoming a feature of the leadership debate, to ourselves. A leader needs to lead, to challenge his or her party. Not just tell them what they want to hear."

He will add: "Of course we need to talk to those who voted for us. But we lost one million votes between 1997 and 2010. So it is essential we speak to those that didn't support us too. And to do that we need credibility. That means starting from where the country is, not where we'd like it to be."

l Chancellor George Osborne will describe critics of his economic strategy as "deficit deniers" who are "taking the British people for fools" in a speech today. Striking a "cautiously optimistic" note about the prospects for the economy, he will argue that sticking to a deficit reduction course is not a gamble, but it is the only way to navigate a choppy recovery. "The gamble would have been not to act, to put Britain's reputation at risk," he will say.