Ed Miliband has said there will be no return to the tax and spend policies of past Labour governments.
The Labour leader told activists at the party's national policy forum that higher spending would not solve the UK's economic problems.
He said Labour would be more radical than in the past - and there was a need to "fundamentally reshape our economy".
He said the "basic principle" would be that working people should not find themselves in poverty.
The national policy forum in Milton Keynes will see Labour finalise many of the policies it will argue for at next year's general election.
'Traditional answer'Mr Miliband said Labour would offer a "binding commitment to balance the books".
"We will get the national debt falling as soon as possible in the next Parliament and we will deliver a surplus on the current budget," he said.
He said the Conservative "recipe for economic success" included low wages, zero-hours contracts and bad terms and conditions for workers.
But he said Britain "will never succeed with a race to the bottom".
"We know, Labour knows, Britain only succeeds when working people succeed and that needs a Labour government," he said.
Mr Miliband said the solution to Britain's economic problems "cannot be our traditional answer of spending to fix the problem".
"Unless we fundamentally reshape our economy, we will only ever be able to compensate people for unfairness and inequality," he said.
He said Labour would "mend the link between hard work and reward".
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