Denis MacShane: A new leader, a fresh era... and the crucial challenge as Labour starts to renew itself

His audacious bid to challenge his brother, as if Bobby Kennedy had run against JFK to be the Democratic candidate for the US presidency in 1960, has paid off. David Miliband had the machine, the money and Lord Mandelson's support. But it was the younger brother, the outsider, who squeezed past at the post.

Ed Miliband is both the double and the opposite of David Cameron. After false starts with William Hague and Iain Duncan Smith, the Conservatives decided they needed a Tony Blair, a man with charm, PR plausibility and good TV skills, to lead them.

Now the Labour Party has chosen its version of David Cameron to be its leader.

Ed, like Dave, is friendly, polite and eager to please. He travels light in ideological terms. Just as Dave buried Thatcherism, Ed, with an impatient wave of hand at Andrew Marr yesterday, announced that New Labour was finished. He also said he would reach out to the middle classes, admitted Labour got things wrong, said strikes should be the last not first resort, and accepted the need for cuts.

But, at the same time, Miliband is the opposite of Cameron. The Prime Minister is a country person, an Old Etonian, extremely rich with an even richer wife. While cultivated and clever, he looks perfectly at ease loading a shotgun and going off on 20,000-a-throw yachting holidays in the Aegean. Miliband comes from the professional middle classes. They look with disgust at the greed both of bankers and London bosses as well as the town clerks, BBC executives, and quangocrats who have diverted taxpayers hard-earned money into a cornucopia of handsome pay, perks and pensions. The country wants a new economics. One that is business-friendly, has lower personal taxation and does not reward naked greed. David Cameron and Nick Clegg have no answer to that trilemma. Nor yet does Ed Miliband. If he can fashion one, Labour will be back in business.

Ed Miliband also has to make clear he is not a prisoner of union leaders. His older brother, David, won most votes from MPs and party members. Ed was given massive backing by the public sector trade unions who liked his language against the policy of cuts being implemented by the new Government. But like Prince Hal who became Henry V, he has to make clear to the Falstaffs of old Labour that their time is over. Labour under Miliband has to reach out to the electorate in the richer south of England where voters who elected Tony Blair three times have now moved en masse to the Conservatives. These voters hate public sector strikes and do not want to pay more taxes to fund bloated state expenditure.

But the ConDem spinners who will want to portray Ed Miliband as a prisoner of protests should pause and think. In 1970, Edward Heath's government arrived in power after the unpopular Harold Wilson was defeated. But, within two years, Heath was in trouble as he got social policy badly wrong. There is a fine balance between deficit reduction – a good thing – and slashing at disability benefits as well as swelling the dole queue and going into negative growth as Cameron-Clegg style cuts in Ireland have brought about.

By May 2011 or May 2012, the absence of police on the streets, the sight of poor people being evicted from housing and Britain's defence profile looking like that of Spain or Italy will be blamed on Mr Cameron while Labour has long moved on from Gordon Brown's unhappy premiership.

Labour under Ed Miliband is now poised to become again a party of England, indeed a party of Yorkshire. If David Miliband stays in the shadow Cabinet and Ed Balls and Yvette Cooper are given top jobs, the future of Labour will be decided by two families of MPs on the train north from King's Cross every Friday. Other stellar Yorkshire Labour MPs like Rosie Winterton, John Healey, Hilary Benn, Caroline Flint, and Alan Johnson are all running for the shadow Cabinet. It is goodbye to the dominance of Labour by its Scottish tribe. After 1979, Labour became a Scottish party. Two of its leaders, John Smith and Gordon Brown, were Scots. Tony Blair was educated in Edinburgh. The stars of New Labour were Robin Cook, John Reid, Alistair Darling or Douglas Alexander. The Tartanisation of Labour is over.

For 20 years, Labour has dodged the question of a policy for England and the English question will now have to be addressed as the Government pushes ahead with its plan to cut the number of seats in the Commons and create new constituency boundaries that will disadvantage Labour.

Ed Miliband's election is the end of the New Labour era. On his young shoulders lies the responsibility of Labour returning to power or, as in the 1950s and 1980s, remaining in perpetual opposition.

Denis MacShane is Labour MP for Rotherham and a former minister.