LABOUR must promise to get tough on spending, cutting some benefits to the rich and keeping a tight rein on government finances if the party is to regain power, shadow chancellor Ed Balls said yesterday.
In a pair of symbolic moves he pledged to scrap winter fuel allowance for the richest pensioners and said he would stick with George Osborne’s spending plans as a starting point for a new government from 2015.
A Labour government would then shuffle spending around within that overall package, instead of increasing spending immediately.
Business groups backed the plan.
“The need to rein in public spending is vital and we commend Ed Balls for recognising the issue of universal benefits paid to well-off pensioners who do not need them,” said the Institute of Directors’ Simon Walker.
But unions worried the shift in stance means both main parties are now committed to cutting spending.
“Mr Balls has out-Osborne’d Osborne,” said GMB head Brian Strutton. “Saying Labour will do nothing substantially different until at least 2017 shows a complete absence of aspiration for ordinary working families.”
But Balls said it is vital Labour regains credibility on the economy.
“The task of opposition parties is to win voters’ trust step by step, and we are not there yet,” he said. “Labour must start planning now for what will be a very tough inheritance in 2015. It will require us to govern in a very different way with less money around. We will need an iron discipline.”
Spending cuts should be focused on the rich, Balls said, suggesting £100m could be saved by cutting fuel payments to the richest pensioners.
And the benefits cap could be varied by region, moved higher in the expensive south east and lower in areas with a lower cost of living.
However the Conservatives said Balls has further to go to restore credibility.
“Ed Balls is incapable of admitting that Labour spent and borrowed too much in government, he has opposed every single tough decision we’ve taken to cut the deficit,” said Treasury minister Sajid Javid.
And a Lib Dem source said the plans are not ambitious enough.
“There is a need to look at the winter fuel allowance, but this plan is a drop in the ocean,” said a party insider.
BALLS’ SPENDING PLAN FOR WINNING IN 2015
If elected, Labour will save £100m by stopping winter fuel payments to the richest five per cent of pensioners.
Balls will consider ending other universal allowances if he deems it appropriate – but not free bus passes or prescription charges.
He will stick with George Osborne’s total spending plans as the basis for Labour spending.
Cabinet colleagues will only be allowed to reshuffle spending within that total, not ask for more money.
He may also cut taxes, re-introducing the 10p tax band.
He also wants to re-evaluate every pound of spending from the bottom up in a major efficiency drive.
That could see police and fire services merged, and councils and other bodies sharing service centres.
Top brass in the armed forces could be cut to reflect the shrinkage in troop numbers, while healthcare and social services could become one service.
Network Rail could get responsibility for the new high speed line, instead of a new firm, duplicating similar roles.
And industries might have to shoulder more of the burden of the cost of their regulators, instead of funding them through the central pot of tax revenues
If he was in charge now, Balls would cut VAT for a limited time to ease the squeeze on households.
And he said Labour would borrow another £10bn to build hundreds of thousands of affordable homes in the next two years.