Balls: we will use bank sale to plug debt

ED Balls, the shadow chancellor, will today try to rebuild Labour’s shattered economic credibility by pledging to use any windfall from the sale of the taxpayer’s stake in the banks to repay the national debt.

Balls – who has been labelled a “deficit denier” by his opponents in the coalition – is also expected to announce plans to introduce a new fiscal rule by the time of the next election.

He is expected to say: “Before the next election – and based on the circumstances we face – we will set out for our manifesto tough fiscal rules that the next Labour government will have to stick to to get our country’s current budget back to balance and national debt on a downward path.”

Balls’ decision to use his speech to the Labour party conference to preach “fiscal responsibility in the national interest” represents a marked shift in tone for the shadow chancellor, who has so far avoided questions about the parlous state of the public finances.

Meanwhile, Balls is said to have forbidden the rest of the shadow cabinet from claiming that a Labour government would reverse coalition cuts, in a bid to prove that Labour is fiscally responsible.

However, the shadow chancellor is expected to use the bulk of his speech to renew his attack on the coalition’s handling of the economy, accusing them of putting the recovery at risk by making cuts that are “too far” and “too fast”.

Meanwhile, shadow business secretary John Denham will today set out his interventionist ideas for government, arguing the state should exert more influence over corporate policy and investment decisions.

He will use his conference speech to argue against short-termism in investors, saying “the company that invests long term is better for Britain than the one that just wants a quick buck”.

He will also tell party members that VAT should be cut in order to stimulate the economy and bankers’ bonuses should be used to build more housing and create new jobs for young people.

Denham will slam project Merlin, which he will argue has been a failure, with small businesses still struggling to get credit.

● Party leader Ed Miliband announced yesterday that Labour would increase the cap on tuition fees from the current maximum of £3,375 to £6,000, rather than the £9,000 limit that the coalition plans to introduce in 2012.

● This new fees cap would require an increase in government funding compared with the coalition’s plans.

The gap, Miliband says, would be paid for in part by exempting companies in the financial services sector from the government’s planned corporation tax cuts.

● Miliband also wants higher-income graduates to subsidise the education of those who go on to earn less. He wants to charge graduates earning over £65,000 per year a higher rate of interest on their student loans.

● Those measures mean the plans are fully costed, he said.

● Overall, the party says that the proposals mean fewer potential students from poor backgrounds will be put off going to university purely because of the cost of fees.