Labour does not know which Conservative Party will turn up to fight the next election, or even whether David Cameron will survive to lead his party to the polls, Ed Balls told a Fabian fringe meeting before the Labour special leadership conference in Manchester.

"We don't know whether we will fight a phoney centrist Conservative Party, a Conservative Party of the right, or a Conservative Party of the hard right. And we have to plan on the basis that we might have to fight a David Cameron-led Tory party, a William Hague-led party or a David Davis-led party," said Balls, pointing out that Michael Portillo's Sunday Times analysis of the party's internal rift showed how far the Tory internal debate "is genuinely up for grabs."

Balls, who was speaking alongside John Denham MP, Polly Toynbee of The Guardian and Fabian Research Director Tim Horton, argued that Labour's ability to achieve a stable and orderly transition had finally shifted the emphasis away from the story of Blair versus Brown, so putting a new and quite different public scrutiny on the Conservatives under which the party had looked divided and out of touch.

"One small lesson you learn in politics is that if you are going to announce a Clause four moment to show that your party has changed, it is quite important to be able to stick to it for more than 48 hours," he said. David Cameron's strategic dilemma was that he had to choose between party unity and trying to show the public that his party had changed.

"Labour's task is to expose David Cameron's fundamental challenge – to be united as a party, the Conservatives have to be out of touch with the concerns of the British people. David Cameron has now realised that disunity is such a disaster for him that he has to move to the right," said Balls, predicting further internal tensions over building more houses and other issues.

Polly Toynbee said that, while one opinion poll did not make a summer, the personal ratings of the party leaders in the Mori/Observer poll highlighted a serious problem for David Cameron. But Gordon Brown's leadership campaign had been about broad themes while largely keeping his powder dry on the content.

"We haven't yet got a programme. How brave will he be?," she asked.

Toynbee recommended that Gordon Brown's four watchwords should be "clean, green, family and fair". She felt that Brown clearly wanted a more open, transparent and inclusive politics.

"Taking risks is what political trust is made of," she argued. London's congestion charge showed how the public does respond to "somebody doing something they believe in, even if it is not obviously immediately popular".

"Fairness has to be the big battle-flag," said Toynbee, with concern about excess at the top now being expressed by some of the super-rich themselves.

She recommended that an opportunity tax should ask those doing best to contribute more to extending opportunities and breaking down social division:

"This could be at two different levels and rates – over £100,000 and over £500,000, now that there are a growing number of people earning over £500,000 in the top 0.1%. The money needs to be earmarked to provide opportunities for the poorest schools and kids, so that we ask those doing best to contribute more but we can show what that money is achieving. Philanthropy alone won't do it," she said.

John Denham said that a fourth Labour election victory depended on re-energising all parts of Labour's winning coalition of voters.

"We had to win the support of all of those who have always been Labour, and also voters who had not been Labour, including those who had thought that they never could be. Now, we have to re-energise every part of that voting coalition," said Denham, arguing that it was a mistake for Labour to think it had to choose between appealing to swing voters and lost progressive voters from its core support.

"Do these different groups of voters feel that we understand their lives, their fears, their hopes and aspirations, that we as a party live in the same streets that they do?" asked Denham. A party of government needed to find a fresh way to look at the country as though it were in opposition, so as to connect with "the real lives of people who do not have the lives and opportunities that we would want," he said.

Labour's agenda had to appeal coherently across this broad coalition where voters had very different lives and aspirations. "The perspective of those wanting more social housing and those struggling to be a first-time buyer may well be different. When we talk about affordable housing, both groups need to understand that we are talking about both of them and not only one side," said Denham.

While policies would matter, what was most important was to be able to explain what Labour wanted to achieve

"in terms of the fundamental values that we have as a party, and that other parties do not have," he said. There was rightly an impatience to do more for those whose life chances are not equal. But he warned that this must not project to other groups of voters that 'you've had your turn' and to not engage with their own difficulties, for example in balancing work with family life and childcare.

Balls also warned that it would be a disaster for Labour "to dismiss the struggle on the economy as being dealt with."

"The great mistake the Clinton-Gore transition made was to forget that 'it's the economy, stupid', and move into what they called the politics of the surplus. There are continuing and intensive struggles in the economy in responding to global economic change, supporting skills so that people could get better jobs and providing the infrastructure which a strong economy needs. And the economic risk of taking a gamble on the Conservatives is at the top of the public's concerns," said Balls.

The Fabian fringe meeting on Winning a 4th term was held in the Midland Hotel, Manchester, on Sunday 24th June 2007. The speakers were Ed Balls MP, John Denham MP, Fabian Research Director Tim Horton and The Guardian's Polly Toynbee, with Sunder Katwala chairing.

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