Britain should have a day to celebrate its national identity, Gordon Brown has proposed in a speech portraying Labour as a modern patriotic party.
The chancellor used his first major speech of 2006 to urge Labour supporters to "embrace the Union flag".
In an address to the Fabian Society in London, he said it is important the flag is recaptured from the far right.
Mr Brown said promoting integration had become even more important since the London bombings.
"We have to face uncomfortable facts that while the British response to July 7th was remarkable, they were British citizens, British born apparently integrated into our communities, who were prepared to maim and kill fellow British citizens irrespective of their religion.
"We have to be clearer now about how diverse cultures which inevitably contain differences can find the essential common purpose also without which no society can flourish."
He said society should not apply a narrow "cricket test" to ethnic minorities but needed a "united shared sense of purpose".
In the wide-ranging speech, Mr Brown said it is time for the modern Labour party and its supporters to be unashamedly patriotic as, for too long, such feelings have been caricatured as being tied up with right-wing beliefs, when in fact they encompass "progressive" ideas of liberty, fairness and responsibility.
"Instead of the BNP using it as a symbol of racial division, the flag should be a symbol of unity and part of a modern expression of patriotism too," Mr Brown said.
"All the United Kingdom should honour it, not ignore it. We should assert that the Union flag by definition is a flag for tolerance and inclusion."
The speech to the left-of-centre think-tank included references to the July 4th celebrations in the US and the common practice of many citizens having a flag in their gardens.
"What is our equivalent for a national celebration of who we are and what we stand for?" Mr Brown said.
"And what is our equivalent of the national symbolism of a flag in the United States in every garden?"
Labour MP Michael Wills, who has been working on the idea with Mr Brown, told BBC Radio 4's Today programme the chancellor wanted there to be a day to "focus on the things that bring us together... whatever our backgrounds".
"The French have it with Bastille Day, the Americans have it, most countries actually have a national day and I think it's probably time that we do too," he said.
The Commission for Racial Equality welcomed Mr Brown's comments.
"It is important to talk about and identify our shared common values and discuss ideas and find ways to celebrate being British," a spokesman said.
Singer Billy Bragg told the BBC it was right to have a national debate about what it means to be British.
"I do think we need to talk about the issue of identity, about who we are," he said.
"We live in a very multi-cultural society, perhaps the most multi-cultural society in Europe. What actually binds us together? Well, interestingly the thing that binds us together is our civic identity which is Britishness".
Former Prime Minister Sir John Major told the Today programme the chancellor was "absolutely right" to promote the concept of Britishness.
But he added: "He seems not to mention that many of the actions of the present Government have ruptured Britishness by their own legislation."
Mr Brown also described his drive to encourage volunteering.
The government has already allocated £50m for volunteering, but Mr Brown wants businesses to match this as part of a plan is modelled on the US's successful GI Bill from the 1940s.
The chancellor unveiled his National Community Service scheme a year ago to encourage one million young people into volunteering.
Shadow Chancellor George Osborne said the volunteering scheme was a "pale imitation of [Tory leader] David Cameron's National School Leaver Programme announced in August.
"David Cameron is meeting 15 leading youth and community organisations to discuss taking this idea forward on January 24, and perhaps Gordon Brown would like to attend to learn more," he added.