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Ed Miliband has called on Labour activists to "take that term 'big society' back" from the Conservatives to become the "people's party" again.

Launching a major policy review, he said the party must move beyond New Labour to reconnect with public aspirations after "losing its way".

The Labour leader accused the coalition of "arrogant" cuts but said waiting for ministers to "screw up" was no good.

The Conservatives' Michael Fallon said Labour remained divided on key issues.

The two-year review aims to give the party a fresh platform to fight the next election.

It will be headed by former Cabinet Office Minister Liam Byrne and will draw on expertise from outside the party in an echo of a similar exercise carried out by David Cameron when he was elected leader of the Conservative Party in 2005.

Key issues that need to be resolved at an early stage include where the party stands on tax - with Mr Miliband still apparently at odds with shadow chancellor Alan Johnson over whether the 50p top tax rate should be permanent and what form a graduate tax should take.

The policy review was launched at a special meeting of Labour's National Policy Forum in Gillingham, Kent.

Mr Miliband attacked the government's cuts to the school sports budget as "arrogant" and told party members ministers were "breaking promises in the most casual way you can imagine" over changes to tuition fees, child benefits and VAT.

But the Labour leader warned: "The strategy that says wait for them to screw it up, simply be a strong opposition, is not a strategy that is going to work for us."

He said the world had changed dramatically since Labour's last big renewal in 1994 and that the party must listen to the public to "become a movement again".

"We need to be reconnected to the hopes and aspirations of the people of Britain. That's why, when I think about the policy reviews that we're going to be undertaking, they're not about a bunch of experts gathered in a room in London."

Mr Miliband defended New Labour's approach in the Blair-Brown era but said while he believed policies on CCTV cameras and anti-social behaviour orders were right, others - such as proposing 90-days detention for terror suspects - were wrong.

"We have to face up to that," he said.

The Labour leader also intimated he felt previous Labour administrations had been too hands-on.

"Often we saw problems in communities and we thought the answer is a programme or a policy," he said, although he added: "Sometimes it is."

He said the task for Labour was now to stand up for communities and prove they were the idealists in British politics.

"We have got to take that term 'big society' back off David Cameron," he said.

In a final rallying call, he added: "Join us on this journey which makes us once again the people's party, the party of people's hopes and aspirations, back on people's side, back in power making for the fairer, the more equal, the more just country we believe in."

Shadow Welsh Secretary Peter Hain, who chairs the forum, had earlier acknowledged voters had lost faith in political leaders and tired of New Labour.

"We need to change as a party to be a changed Labour for the next general election. We got a hammering at the election and therefore we need to learn those lessons," added Mr Hain.

The policy review will involve shadow cabinet ministers chairing groups, involving party members, universities, think-tanks, charities and other independent institutions, to develop ideas to be incorporated into Labour's reform agenda.

The economy, public services, the role of families and carers, political reform and security will come under scrutiny.

Further groups will consider broader issues, including volunteering, isolation and loneliness in modern Britain, living on low pay, and what it is like to be a victim of crime.

Mr Miliband is also setting up separate taskforces on small business and entrepreneurs, fair pay and the impact of high levels of personal debt.

He has so far given few hints about the shape of the policy platform which may emerge from the review, beyond saying that he backs social mobility and fairness.

But his focus on the "squeezed middle" has been ridiculed by the Conservatives, who have claimed he does not know who they are.

They claim the Labour leader used six different definitions of the phrase in an interview with ³ÉÈË¿ìÊÖ Radio 4's Today programme on Friday.

Mr Fallon pointed out that Mr Miliband had drawn up the policy programme in Labour's last election manifesto.

"He says Labour has lost its way - but he wrote the party manifesto that lost the general election," he said.

"Until he stops dithering, comes up with a credible plan on the economy and sorts out the divisions in his own party over graduate tax, 50p tax and the role of the trade unions, he won't get people to take an interest in Labour."