Ed Miliband opened his campaign to win the Labour leadership yesterday with a warning that the party needs to move on from the New Labour era and rediscover its "radical edge".

The former energy and climate change secretary announced his intention to succeed Gordon Brown in a move that pits him against his older brother David, the former foreign secretary.

In a speech to a Fabian conference in London, Ed Miliband said that after 13 years in office, Labour lost touch with its natural constituency, including millions of people on modest incomes, and lost the progressive ideals of its early years in power after its 1997 election victory.

Although the two brothers will avoid personal attacks during the leadership election, a divide is emerging. Ed Miliband, who is to the left of David, will reject his brother's suggestion that a change of policy on issues such as crime, immigration and housing will be enough to recapture the centre ground and campaign for a radical shift to a "fairness" agenda.

In yesterday's speech, Ed Miliband argued: "We lost that radical edge. When it came to the bankers, we let being in government constrain our willingness to be as radical again. Let's be honest, Gordon's response to the crisis was incredibly bold and helped keep the economy afloat.

"But our response on the excesses of the banks – and the role of the nationalised banks – has not been all it could be. We should have done more to take the opportunity to rethink the banking system and to show our determination to tackle what had gone wrong."

He paid tribute to Brown and refused to blame him for defeat. He said: "Let's not try and explain away our defeat on the basis of one person or one moment."

Ed Balls, the former schools secretary, is expected to confirm he will be a candidate this week. He would have stood aside for his wife Yvette Cooper, the former work and pensions secretary, but she did not want to run.

Other contenders include Andy Burnham, the former health secretary, and Jon Cruddas, a backbench MP with strong grassroots support. Cruddas attacked New Labour for its "broken covenant" with working-class communities on immigration, work and housing.