Her leadership rival, Sir Keir Starmer, said in 2017 as shadow Brexit secretary that free movement “has to go”, while the party also committed to ending it in that year’s general election.
Setting out her leadership pitch, Wigan MP Ms Nandy insisted people’s concerns about free movement would “fall away” under a government that invests in jobs and skills.
Speaking to a packed room at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) in central London on Wednesday, Ms Nandy said: “We should have been bold enough to defend free movement and the opportunities and benefits that it brings.
“But this would have required recognising that it has flaws, and not dismissing concerns about the operation of free movement as simply racist, anti-immigration sentiment.
“We should acknowledge that over decades, successive governments have used a steady influx of skilled labour to cover up a lack of investment, skills and trading in the UK – and we should address this.”
She went on: “I believe in free movement, let me be clear about that. I have always been honest with my constituents and I will be honest with my country.
“If it were paired with renewed and radical investment that enabled opportunity for young people – decent jobs, training and skills – then I know that those concerns about free movement would fall away.”
As well as criticising Jeremy Corbyn and Sir Keir’s handling of immigration, she also blasted Labour’s “controls on immigration” promotional mugs under Ed Miliband’s leadership in 2015.
“One of the lessons from Labour in opposition,” she said, “is that we lose our way when we try to pretend somehow that our values are not our values.
“When we put immigration slogans on mugs rather than going out and making a case that we believe in compassion, tolerance and decency towards people from other countries – and that we also believe very, very strongly in the benefits of people being able to move and travel and live and marry who they want.”
Addressing Labour’s general election disaster last month, Ms Nandy said of the party: “We have been losing a long time now. If we play it safe and take a business as usual approach, Labour will die and it will deserve to.”
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Speaking of her personal ambitions, Ms Nandy said she never had a childhood longing to lead the party. “I wanted to be a baker, and I can’t quite remember why. I can’t cook, by the way, so that’s why I went into politics.”
Describing her proposed style of leadership, she added: “We need the sort of leadership that can build teams that reach into the country and hear what’s happening in different communities and different walks of life.
“That’s the type of leadership I have not seen in my years in parliament.”
Of the five candidates, Ms Nandy is currently third favourite, according to the Oddschecker website.