MILIBAND: LABOUR WILL DEAL WITH THE DEFICIT AND BALANCE THE BOOKS – BUT WE WILL NEVER RETURN TO THE 1930s
Ed Miliband will tomorrow (Thursday) deliver a major speech on how the next Labour government will build a strong economic foundation by dealing with the deficit and balancing the books – but never going down the Tory road to take Britain back to 1930s spending levels which existed before the NHS.
He will set out a tough and balanced One Nation Labour approach to dealing with the deficit based on five principles:
1. Setting a credible and sensible goal to balance the books and get the national debt falling as soon as possible within the next Parliament.
Not having a fiscal plan which sets a target of a 35 per cent state, putting public services and productive investment at risk.
2. Recognising that Britain will only be able to deal with the deficit by tackling the cost-of-living crisis.
Not allowing welfare spending to rise and tax revenues to fall because of low wages, insecure jobs, housing shortages and social failure.
3. Making common sense spending reductions with departmental spending falling and using money better by devolving power, breaking down old bureaucracies, and rebuilding public services around early intervention.
Not cutting spending to 35 per cent of national income that will lead to disintegrating public services and a permanent cost-of-living crisis because we won’t be investing in the skills needed for good jobs and healthy revenues.
4. Protect everyday working people by ensuring those with the broadest shoulders bear the greatest burden.
Not cutting taxes for the wealthiest while asking everyday working people to pay more.
5. Promising new policies only when they are fully funded, like Labour’s £2.5 billion time to Care Fund for the NHS, so that they do not require any additional borrowing
Not making commitments that depend on borrowing or promising unfunded tax cuts skewed to the wealthiest that will eventually be paid for by bigger cuts to public services or increases in VAT.
To underline Labour’s determination to deal with the deficit fairly and balance the books as soon as possible in the next parliament, Ed Balls is tonight writing to members of the Shadow Cabinet.
This letter states that, except for a limited number of priority areas of spending which will be protected, shadow ministers should be planning for departmental budgets to be cut each year until the next Labour government has balanced the books.
In his speech tomorrow, Mr Miliband will attack the Tories for pursuing an extreme project, motivated by ideology rather than necessity, which will put vital public services at risk.
“My speech today is about the deficit. Its place in our priorities, how a Labour government would deal with it, and how we would do so consistent with our values.
“The Tory plan is to return spending on public services to a share last seen in the 1930s: a time before there was a National Health Service and when young people left school at 14. There is only one 35 per cent strategy in British politics today: the Tory plan for cutting back the state and spending on services to little more than a third of national income.
“And they have finally been exposed by the Autumn Statement for what they really are: not modern compassionate Conservatives at all - but extreme and ideological, committed to a dramatic shrinking of the state and public services, no matter what the consequences.
“They are doing it, not because they have to do it, but because they want to. That is not our programme, that will never be our programme, and I do not believe it is the programme the British people want.
“This is a recipe for public services that will disintegrate and for a permanent cost of living crisis because we won’t be investing in the skills and education people need for good quality jobs, and indeed for sufficient tax revenues. And we know what the result will be: the Tories might be able to deliver the cuts they have promised, but they won’t be able to cut the deficit as they promised.”
But he will state clearly that Britain must deal with the deficit to create the strong economic foundation needed to build prosperity for working people, attract investment and fund our public services.
“Some people think the deficit simply doesn’t matter to our mission and should not be our concern. They are wrong. It matters.
“Because unless there is a strategy for dealing with the deficit, it is working people who will end up paying the price of the economic instability that is created. It is also necessary for funding our public services because higher debt interest payments squeeze out money for those services and for investment in the long-term potential of our country.
“There is no path to growth and prosperity for working people which does not tackle the deficit. What we need is a balanced approach which deals with the deficit - but does so sensibly.”
He will set out five principles for dealing with the deficit and clear dividing lines with a second term Conservative government on this issue.
“These are the principles of deficit reduction a Labour government will follow: balancing the current budget, not destroying productive investment; an economic strategy to bring the deficit down, not drive it up; sensible reductions in spending, not slash and burn of our public services; the wealthiest bearing the biggest burden, not everyday people; and fully funded commitments, without additional borrowing, not unfunded tax cuts that put our NHS at risk.
“This is the central contrast between our approach and the Conservatives. We will deal with the deficit but we will never return to the 1930s. We won’t take risks with our public finances. And we won’t take risks either with our public services, our National Health Service.
“Our tough and balanced approach will balance the books through an economy based on high wages and high skills, common sense spending reductions and fair choices on tax. Their unbalanced approach of 1930s public spending and unfunded tax cuts will put at risk our National Health Service, undermine our economic future, and threaten working families.
“This is now a fight for the soul of our country. It is a fight about who we want to be and how we want to live together. The Tory vision is clear: the wealthiest being looked after, everybody else on their own, public services not there when you need them. Our vision is different: a country that works for everyday people, with public services your family can rely on, a government that prioritises working people so that we can earn our way out of the cost of living crisis, a Britain built on strong economic foundations.”
He will say that Labour’s plans for reforms of the economy – on jobs, skills, low pay and access do not require big spending – and they will raise wages and tax revenues while cutting social security bills.
“Higher spending is not the answer to the long-term economic crisis that we have identified. Unless we fundamentally reshape our economy, we will only ever be able to compensate people for unfairness and inequality. That is why our agenda for creating social justice is about big reform, not big spending.”
But he will also underline the message from the Shadow Chancellor to their colleagues today that there will be spending cuts in most government departments every year until the deficit has been cleared.
“But I want to be clear about what the backdrop will be for a Labour government. We have said previously we will raise extra resources for our NHS and protect our commitments to international development. And our manifesto will spell out other limited areas which will have spending protected. Outside those areas and departments, we’ve already said that for the first year of the next government most budgets will fall.
“But it won’t just be for the first year. Outside protected areas, for other departments, there will be cuts in departmental spending.
“And we should plan on it being for every year until the current budget is in balance. Today, as our Zero-Based Review of every pound spent by government continues, Ed Balls is writing to our shadow cabinet colleagues spelling this out.”
He will say Labour will make fairer choices to help protect vital services and balance the books with measures including a Mansion Tax on properties worth more than £2 million, cracking down on tax avoidance, and reversing the millionaires’ tax cut to restore the 50p rate on incomes over £150,000 a year.
“In these hard times, we are determined to do everything we can to protect everyday taxpayers from bearing an increased burden and to do all we can to protect public services. And those who have done best, under this government and indeed under the last, must pay their fair share.
“We want successful entrepreneurs and those who do well to be rewarded. But we must pull together as a society not drift apart and we cannot do that if deficit reduction is simply on the backs of ordinary people.”
Mr Miliband will say Labour will only make new commitments that are credible, costed and funded without additional borrowing – unlike the Conservatives who are promising unfunded tax cuts that would put public services at risk.
“This is an essential test of credibility. There is huge uncertainty about the deficit because of economic circumstances and on the basis of recent experience. That makes it all the more important that parties do not spray around unfunded commitments they cannot keep.
“It is why we will only make commitments in our manifesto that are properly funded - not commitments that depend on borrowing. That’s why we’ve explained how we will pay for every policy that we’ve put forward: costed, credible and funded.
“In contrast, the Conservative Party has pledged to make tax cuts when they have absolutely no idea how they will fund them: tax cuts that will cost over £7 billion a year at the end of the Parliament and even more, billions more, if they happen earlier in the Parliament.
“The Tories cannot say how they would fund their tax cuts skewed to help the wealthiest. This is not responsible and it is not right: the British people should be in no doubt what the Tory promise means: they will pay the price for tax cuts in higher VAT or even bigger cuts to public services. The Tories’ priority is unfunded tax cuts, Labour’s priority is to save our National Health Service.”
ENDS
Please find below the full text of Ed Balls’ letter to the Shadow Cabinet:
Dear Shadow Cabinet colleague,
As we discussed yesterday, the Autumn Statement confirmed that David Cameron and George Osborne have now broken all of their promises on the economy.
They promised people would be better off, but while those earning over £150,000 have been given a £3 billion a year tax cut, working people are now on average £1,600 a year worse off since 2010.
The continuing squeeze on living standards has led to tax revenues falling short, which is why George Osborne has had to admit that his promise to balance the books by next year will be broken. He is now set to have borrowed £219 billion more than he planned and government borrowing next year is forecast to be £75 billion.
This presents a huge challenge for the next Labour government. As Ed Miliband and I have said, we will balance the books where this government has failed and do so in a fairer way. We will cut the deficit every year, and deliver a surplus on the current budget and falling national debt as soon as possible in the next Parliament. But we will take a different approach to balancing the books than the Tories.
It’s now clear the Tories have abandoned any pretence of being in the centre-ground with an increasingly extreme and unbalanced plan. They have made an ideological choice to pencil in deeper spending cuts for the next Parliament because they are refusing to ask those with the broadest shoulders to make a greater contribution and, crucially, are ignoring the need for a plan to deliver the rising living standards and more good jobs that are vital to getting the deficit down.
In contrast, Labour will take a tough but balanced approach to getting the deficit down. Our economic plan will deliver the rising living standards, more good jobs and stronger and more balanced growth which are a vital part of any fair and balanced plan to get the deficit down.
We will make different and fairer choices from the Tories, including reversing this government’s £3 billion a year tax cut for people earning over £150,000 and taking action to close tax loopholes and introducing a mansion tax on properties worth over £2 million in order to help save and transform our National Health Service.
And unlike George Osborne, we will not make any spending or tax commitments without saying where the money is coming from.
But as we have discussed a balanced plan to reduce the deficit will also require spending cuts.
We have already set out a number of the difficult decisions we will have to take, including scrapping the winter fuel allowance for the richest five per cent of pensioners, cutting Ministers’ pay by 5 per cent and capping child benefit rises at one per cent for two years.
We have already made clear that the NHS will be a priority for the next Labour government – including with our plans to raise £2.5 billion a year for Time to Care Fund, on top of the Tory spending plans we inherit. We also have a long-standing commitment to spending 0.7% of national income on overseas development aid. We will set out for our manifesto other priority areas of spending which will be protected.
In the meantime you should be planning on the basis that your departmental budgets will be cut not only in 2015/16, but each year until we have achieved our promise to balance the books.
Of course all departments have been taking part in the Zero-Based Review of every pound spent by government, because even priority areas of spending which will be protected should be looking for waste and efficiencies that mean resources can be prioritised for the frontline.
A number of departments have already shown how, in the context of reduced budgets in the next Parliament, they can make different choices which will allow frontline services to be better protected. For example, the Shadow Home Affairs team has set out how it will make nearly £250 million of savings – including by scrapping elected Police and Crime Commissioners and mandatory joint purchasing of equipment by police forces – in order to better protect frontline policing.
Chris Leslie’s cross-departmental work has also set out how we will look to sell government buildings and assets where there is a value for money case for doing so and seek to move more civil service jobs out of London in order to help make savings and rebalance our economy too.
We will be publishing further interim reports from the Zero-Based Review in the coming weeks and months.
These are the elements of Labour’s tough but balanced and fair plan to get the deficit down: a credible and sensible goal for balancing the books, a plan to change our economy, making tough but different choices on spending and taxation, ensuring those with the broadest shoulders bear the greatest burden, and not making any unfunded spending or tax commitments.
It is in sharp contrast to a Tory approach which has failed in this Parliament and which is set to be increasingly unbalanced and extreme if they win the election.
Yours sincerely,
Ed Balls