UK’s economic growth prompts foretaste of election battle
George Osborne says UK is on ‘path to prosperity’; Ed Balls says there is ‘no recovery at all’ for millions. Read more…
Ed Balls – Alex Salmond’s sterling currency union plans flawed
Shadow chancellor says nationalists want to dismantle the very things that make a shared currency work. Read more…
Labour promises 25 hours of free childcare a week
Shadow chancellor Ed Balls to announce policy for all three- and four-year-olds at party conference on Monday. Read more…
Osborne’s policies have done long-term damage to economy claims Balls
Shadow chancellor cites youth unemployment and ‘stalled deficit reduction’ in call for ‘balanced and sustained recovery’ plan. Read more…
Ed Balls clarifies Labour position over pension spending
Shadow chancellor insisted his party is committed to pension ‘triple lock’, but that it will monitor long-term expenditure. Read more…
The tough-as-titanium spending plan Ed Balls laid out could clinch an election. Can Ed Miliband provide matching vision?
An alarming 47% of voters say Labour “cannot be trusted with the economy”, in a Labourlist/Survation poll this week. Two years to the election the two Eds need to scale that cliff of mistrust: this week they strap on their crampons, each with a key policy speech. What will it take?
These are the twin peaks to climb: first anchor tax and spending commitments to a secure base camp, then shift the public’s sights towards growth as the only route upwards. On Monday Ed Balls conceded what has become all but inevitable: in its first year a Labour government would stick to spending plans George Osborne will announce for 2015/16 in his spending review. “Iron discipline” and “big and painful choices” for “a tough deficit reduction plan” with “tough fiscal rules” will confine all would-be Labour ministers to existing departmental budgets: any Olivers begging for more will feel the heel of the iron shadow chancellor. That is the “starting point”, and, short of economic change, that’s likely to be what Labour’s manifesto says.
Swallowing the iron envelope hurts, but it has become a necessity since Labour’s failure to win crucial arguments: Labour “overspending” has been successfully blamed for the size of the national debt, with the cost of the crash and bank bailouts blurred into the overspending story. Never mind that David Cameron pledged to match Labour spending, or that Gordon Brown didn’t crash the global economy – or that the national debt at the time of the crash was less than Labour inherited from John Major in 1997.
The hard truth is that the Tories and their mighty press have won the battle over the writing of that history, as victors do. Keynes’s “paradox of thrift” proved too paradoxical. Now Labour can only try to win the battle for the future – and that requires cauterising the past. Besides, inheriting Osborne’s no-growth legacy means there will be no great leeway for a splurge in current spending.
But that’s only half the story. The Ed Balls speech was unexpectedly specific about a host of cuts and spending changes within the envelope to pay for Labour priorities and tilt the balance towards fairer shares. Redistribution within current spending means a mansion tax, a 10p tax rate, abolishing top pension tax relief and taxing bank bonuses to pay for a universal job guarantee for the long-term unemployed. Spending money can be freed up by cutting wasteful new free schools and Titan prisons, and axing police and crime commissioners and top brass in the military. Why are there more admirals than ships? Let industries pay for their own regulators, merge departments and even, boldly, hint at merging of police and fire. Labour has policies.
After Ed Miliband’s contorted avoidance of the B-word, Labour will be unafraid from now on to advocate borrowing for capital investment. The fiscal rules will allow it, outside the current spending corset. The £10bn the IMF said we could easily afford to borrow would build 400,000 homes, creating 600,000 jobs. Airport capacity, rail and road improvement, flood defences, broadband, early years and home care all need investment, he says. How much? It needs to be many times more than that timid £10bn if it is to carry the weight of his critique of Osborne’s failure to invest. If on the day there were only a whisker of spending difference between the parties, then the sound and fury of Balls’s demolition of Osborne’s disastrous five years would ring hollow.
Abolishing winter fuel payments for rich pensioners is a good symbol. This small but totemic cut tweaks Cameron by the nose, since his backbenchers and the Lib Dems call for it – and so does the Sun. Cameron is the victim of his vote-grasping pledge not to touch any pensioner’s benefit, heaping the cruellest cuts on to non-voting children. There is plenty more where this comes from: why do pensioners in full-time work pay no national insurance, for instance?
But far tougher benefit questions are yet to be answered. On Thursday Ed Miliband will reveal what kind of cap Labour will impose, anticipating Osborne’s move later this month to cap annual managed expenditure – spending on pensions, benefits and debt. Osborne’s crude fixed sum regardless of need or numbers out of work is something Labour must (and will) reject. Instead Miliband looks likely to go for a benefit spending target spread over time; Labour’s message will be that the right way to cut housing benefit is to build homes and reduce rents. The right way to cut the benefit bill is to get people into living-wage work. Can he illuminate a convincing Labour path to revive public trust in social security?
Ed Balls’s brain was never in doubt, and his impressive speech set out a credible economic plan, tough as titanium – too tough for some Labour tweeters. Whatever flak he takes will not be for softness: one look in his steely eye and you know he’ll mince any colleague uttering an uncosted spending promise. The problem is more serious: where is the overarching idea?
The Tories have one – shrink the state, whatever it takes. Miliband has spoken powerfully of the dysfunctions of a bankrupt capitalism that lets the top 10% suck up money while wages for the rest fall further behind. Something is wrong when risk falls on governments while profits go to the very few. Look how investment in the real economy stagnates while another great bubble in shares and property is re-inflating.
On tax avoidance, Balls went oddly out of his way to say there was little mileage in squeezing global cheats until the pips squeak. His plan is for amelioration: a Labour government would be fairer, a Labour economy would grow better. But where is his remedy for profound imbalances and distortions with ever worsening booms and busts? Will he be back schmoozing the City, for fear that it’s the only way Labour gains business’s acceptance to govern? Learning from all Labour failed to do last time, the party needs a grander vision for re-ordering a deeply disordered status quo.
However, for the essential purpose of election-winning over the next two years, Balls’s “iron discipline” may do the trick. He recalls how Labour went into the 1997 election still 7% behind on economic credibility, despite being handcuffed to a two-year freeze. Oppositions are rarely trusted with the economy, and Labour never pulled ahead until it ran the Treasury itself. But do both Eds know how they would run it better this time?
Shadow chancellor says Labour will deny grant to richest pensioners, but critics claim measure will make little difference
A future Labour government will halt winter fuel payments for 600,000 of Britain’s richest pensioners, Ed Balls will say in a speech that represents a significant break with the tone of Labour’s previous economic announcements.
Stung by criticism that Labour has failed to come up with concrete policies to address the government’s budget deficit, the shadow chancellor will acknowledge the need for a cap on spending and announce a £100m cut in benefits.
The speech follows an intense debate between senior Labour officials over how to address the opposition’s perceived failure to win over the public on the economy and offers a broad list of spending priorities, including on infrastructure. The cut has been described by George Osborne’s advisers as “utterly meaningless”.
In the speech on the UK economy at Thomson Reuters on Monday, Balls will say Labour must begin planning for a “tough inheritance” if it wins the 2015 election.
“When our NHS and social care system is under such pressure, can it really remain a priority to pay the winter fuel allowance – a vital support for middle- and low-income pensioners – to the richest 5% of pensioners, those with incomes high enough to pay the higher or top rates of tax?” he will say.
“Labour believes the winter fuel allowance provides vital support for pensioners on middle and low incomes to combat fuel poverty. That’s why we introduced it in the first place. But in tough economic times we have to make difficult choices about priorities for public spending and what the right balance is between universal and targeted support. So at a time when the public services that pensioners and others rely on are under strain, it can no longer be a priority to continue paying the winter fuel allowance to the wealthiest pensioners,” he will say.
In words that will worry some of Labour’s union backers, Balls will say the party will inherit plans for deep government cuts with a large deficit and rising national debt and will have to adjust its goals accordingly.
“We will have to govern in a very different way and in circumstances very different to what we have known for many years. We will inherit a substantial deficit. We will have to govern with much less money around. We will need to show an iron discipline,” he will say.
Balls has previously promised a zero-based spending review after the election, and has also said his deficit reduction plans will be guided by rules overseen by the Office for Budget Responsibility (OBR).
Government officials are privately optimistic that the recovery is going to be stronger than predicted by the OBR, the government spending watchdog, but progress is still vulnerable to the slowdown in the European Union. “The next Labour government will have to plan on the basis of falling departmental spending. Ed Miliband and I know that, and my shadow cabinet colleagues know that too.”
A Treasury source said Balls has confirmed that he wants to borrow and spend even more, and that the cut does little to address the deficit. “Ed Balls has just confirmed he wants to borrow and spend even more now – exactly what got us into this mess in the first place,” the source said.
“One pledge that saves less than half a per cent of the welfare budget is utterly meaningless when they have pledged to borrow and spend tens of billions more.”
Civil servants across Whitehall have saved £10bn for taxpayers by changing the way they work, Francis Maude, the cabinet minister, will claim on Monday.
The savings show the degree by which spending has been reduced, largely compared with 2009-10, the year before the last general election, he will tell a meeting of analysts in Westminster.
Figures published for 2012-13 show that the government has exceeded by 25% the £8bn savings target it set itself after the general election, he will claim.
The efficiency and reform group – a joint Cabinet Office and Treasury initiative – has led a programme to find savings throughout the civil service.
Ed Balls criticises the government’s new tax reforms that have come into effect on Saturday
Ed Balls criticises the government’s new tax reforms that have come into effect on Saturday
Shadow chancellor claims gains from £10,000 personal allowance ‘swamped’ by higher VAT and cuts to tax credits
Families with children where one parent works will be hardest hit by new tax changes that come into force on Saturday, according to shadow chancellor Ed Balls, who says gains from a higher personal allowance of nearly £10,000 are “swamped” by higher VAT and cuts to tax credits.
Balls said prime minister David Cameron had prioritised tax cuts for millionaires over “squeezed” workers after new figures commissioned by the Labour party from the Institute for Fiscal Studies show that a one-earner family with children will lose an average of just under £4,000.
The thinktank’s data shows that a couple with children, where one parent works, will be worse off by £3,995.65 a year on average after the tax and benefit changes introduced since 2010. Average households will be worse off by £891 a year.
Balls highlights a series of changes that will be introduced with the start of the new financial year. These include a freeze in child benefit for a third year and an increase in tax credits by just 1%. The personal allowance will increase to £9,440 although the higher threshold will fall to £41,450 to help pay for this.
Labour argues the figures show the government has the wrong priorities because the tax changes include a cut in the top rate of income tax from 50p to 45p. This will give 13,000 people who earn more than £1m an average tax cut of £100,000. The change will benefit 267,000 people earning £150,000-plus a year.
The shadow chancellor said: “These figures show the full picture David Cameron and George Osborne do not want you to see. They reveal that any gains ministers boast about from the rise in the personal allowance are swamped by higher VAT, cuts to tax credits and child benefit. “
The IFS data shows that lone parents will also be hit by the changes. A lone parent in work will be worse off by £1,225.95 a year while a lone parent out of work will lose £1,206.50. Couples with children where both parents work will be worse off by £1,869.09 while a similar couple with no children will lose £672.10.