June 3, 2013 / 6:33 AM / 6 years ago

Labour vows iron discipline on budget

LONDON (Reuters) - The Labour party sought to convince voters on Monday it is fit to run the economy by promising “iron discipline” on spending and announcing cuts to some welfare benefits if it wins the 2015 election.

Shadow Chancellor Ed Balls speaks at the Thomson Reuters headquarters in London June 3, 2013. REUTERS/Luke Macgregor

Ed Balls, Labour’s would-be chancellor, said he would scrap winter fuel subsidies for the richest pensioners, shaving just a fraction off Britain’s welfare budget but signalling his party is determined to show it can cut social spending.

Labour’s leadership has been criticised by its former prime minister, Tony Blair, for being short on specific policy ideas but it is wary of showing its hand too soon before the election.

The party has a 10-point lead over the Conservatives in opinion polls although it lags on the question of who is best to run the economy, three years it was voted out of office in the aftermath of the financial crisis.

Balls, who held several roles in government with Labour during its 13 years in power, heaped the blame for future cuts on the current Conservative-led government, saying it had “failed catastrophically” to get the economy growing.

He reiterated Labour’s plans to spend more now on infrastructure, funded by extra borrowing while interest rates are low, to spur the recovery, a position recommended by the International Monetary Fund last month.

But Balls stressed the need for Labour to adopt “iron discipline” on day-to-day spending.

“The situation we will inherit will require a very different kind of Labour government to those which have gone before,” he said in a speech at Thomson Reuters in London.

Balls said he would disappoint those within his party hoping a Labour victory in 2015 would mean more ministerial spending.

“The next Labour government will have to plan on the basis of falling departmental spending,” he said.

On Thursday, Labour leader Ed Miliband will make another speech on welfare reform, underscoring how the party wants to give voters a better idea its policies.

Britain’s economy has largely flat-lined for three years as Prime Minister David Cameron focused on cutting public spending and as the euro zone crisis caused havoc in key export markets.


Balls has spent much of the last three years lambasting Chancellor George Osborne for sticking to his plan to eliminate Britain’s budget deficit, one of the biggest in the European Union. Osborne aims to announce 11.5 billion pounds of spending cuts for the fiscal year 2015-16 at the end of June.

To help back up his promise of fiscal discipline if Labour wins power back in 2015, Balls said the party will set out “a clear timetable to get the deficit and the debt down.”

But he declined to say whether Labour would seek to match the budgetary zeal of the current government, echoing the approach of Labour in 1997 which waited until a few months before the election to spell out its spending plans.

“Two years out is very early to be getting into the detail of spending plans,” he told Reuters after his speech. “The history of past oppositions is that when you do it early, you tend to regret it.”

But he said this month’s government spending review would be a “starting point” for Labour and he warned: “It will take years to sort out George Osborne’s fiscal mess.”

To address the criticism of vagueness on policy, Balls said Labour would end winter fuel subsidies for the richest 5 percent of pensioners, to save about 100 million pounds a year.

That kind of idea has been supported by Liberal Democrats in the Conservatives’ ruling alliance, and might prove an overture to them should there be no clear winner of the 2015 election.

Balls also said Labour would aim to put a “fair cap” on benefits, pursue housing benefit reform to address the shortage of affordable housing and would consider whether to scale back child support allowance paid to well-off parents.

He said his long-standing proposal for a temporary cut in value-added tax remained valid but if the economy strengthened, the focus should shift to long-term capital investment. He also reiterated his call for a home-building programme.

Balls acknowledged that Labour had yet to persuade voters that it would be disciplined about spending public money: “We aren’t there yet but we are making progress.”

Additional reporting by Andrew Osborn; Editing by Guy Faulconbridge/Jeremy Gaunt

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