• Nicholas Watt, chief political correspondent
• guardian.co.uk, Sunday 1 January 2012 19.28 GMT

Ed Miliband is guilty of “misguided anti-business rhetoric”, according to a former adviser to Tony Blair, in the latest sign of unease about theLabour leader among supporters of the ex-prime minister.

In a provocative intervention that will fuel divisions at the highest levels of the Labour party, Tim Allan accuses Miliband of drowning out “highly pertinent arguments” on the deficit voiced by the shadow chancellor, Ed Balls.

Allan, one of Blair’s closest aides before the 1997 general election, writes: “Ed Balls’ highly pertinent arguments (in my view) against the speed of the cuts are being drowned out in the public’s mind by his leader’s misguided anti-business rhetoric. Labour has a strong economic argument, but a weak overall political position.”

The remarks by the lobbyist, posted on his Portland company website, go to the heart of divisions at senior levels of the Labour party. Supporters of Blair believe that Miliband was unwise to suggest in his party conference speech last year that he might impose higher taxes on business “predators” whose conduct compares unfavourably with that of “producers”.

Allan’s decision to praise Balls, who has long been regarded with suspicion by members of the Blair circle, shows the level of exasperation with Miliband. The future Labour leader was always regarded more warmly by Blair in the days when he and Balls were advisers to Gordon Brown.

Balls is winning praise across his party for aggressive attacks on the coalition for cutting the deficit too far and too fast. George Osborne has admitted that he will fail to meet his target of eliminating the structural deficit over the course of this parliament.

Allan, who moved into business after a year with Blair in Downing Street, expresses surprise that Labour is not performing more strongly. Writing shortly before the publication over Christmas of a Guardian/ICM poll showing a fall in support for Labour on the economy, Allan said: “Labour has not yet gained the political advantage in the austerity debate. The polling evidence so far shows that Labour is not reaping the benefits for predicting that George Osborne’s policies would not work, because most people blame Labour for the country’s debt predicament in the first place.”

A Labour spokesman said: “Ed Miliband has not and is not attacking business. He is pro-business. He believes in rewarding companies which are investing, inventing, training, making and selling real products and services. He wants to reward productive behaviour, not predatory behaviour. He is pro-business but not pro-business as usual.”

The intervention by Allan comes as Miliband prepares to sharpen Labour’s focus on the costs of living for what he calls the “squeezed middle”. Miliband, who believes that David Cameron is vulnerable on this front, will attempt to portray the Tories as the champion of the “privileged few”.

In the first of a series of new year announcements, Labour pledged to ensure that rail fares would not rise by more than 1% over the rate of inflation. Labour says that a decision by the government to give flexibility to add 5% to some fares, in addition to 1% on top of inflation, will see some fares rise by 9%. Maria Eagle, the shadow transport secretary, said: “It shows how utterly out of touch the Tories are with the impact of spiralling commuting costs on household budgets. Under Ed Miliband, Labour will take on powerful vested interests and stand up for commuters against this sort of predatory exploitation.”

Miliband will use the coming weeks to highlight three key differences with the coalition on the economy. He will say:

• How the deficit is tackled needs to include a proper plan for growth and jobs. He will highlight the five-point plans crafted by Balls, including a temporary reversal in the VAT rise to help guarantee 100,000 jobs for young people.

• Improving the kind of country today’s leaders leave for their children will involve reversing, or softening, government decisions such as the trebling in university tuition fees.

• Labour will focus on “powerful vested interests”, such as energy companies, to relieve pressure on the squeezed middle.

Miliband attempted to soften his image by telling the Mail on Sunday’s Live magazine that he does not regard himself as sexy and wishes he could return to wearing “big glasses and nasty jumpers”. He also admitted that the rift with his brother over the Labour leadership has still not healed. “It was tough. Very difficult. It’s still tough but it’s getting easier.”