Balls commits Labour to 2020 spending surplus

27 Jan 14
Shadow chancellor Ed Balls has committed the next Labour government to running a surplus on current spending by 2020 and pledged to not increase borrowing for day-to-day spending.

By Richard Johnstone | 27 January 2014

Shadow chancellor Ed Balls has committed the next Labour government to running a surplus on current spending by 2020 and pledged to not increase borrowing for day-to-day spending.

In a speech to the Fabian Society’s annual conference yesterday, Balls said Labour would get the current budget into surplus ‘as soon as possible’ in the next Parliament, based on the state of the economy and the public finances.  

A Labour government elected in 2015 would pass legislation enshrining new ‘fiscal rules’ in law, and would stop assessing the public finances on the basis of five-year rolling targets, as Chancellor George Osborne has done. The coalition government’s ‘fiscal mandate’ is to achieve a cyclically-adjusted current balance by the end of the Treasury’s five-year forecast period. This means the target to balance the books is moved on a year at every Budget.

Balls said a Labour government would inherit a very difficult fiscal situation in 2015 that would require hard choices to ‘make sure the sums add up’. 

Deficit reduction would be a necessary and important part of successful economic policy, he added.

‘Without fiscal discipline and a credible commitment to eliminate the deficit, we cannot achieve the stability we need. 

‘But without action to deliver investment-led growth and fairer choices about how to get the national debt down while protecting vital public services, then fiscal discipline cannot be delivered by a Labour government – or, in my view, by any government.’

As well as accepting the coalition’s 2015/16 Spending Review as Labour’s ‘starting point’, Balls confirmed the party would re-introduce a top rate of tax of 50p in the pound if elected.

‘We will have to govern with less money, which means the next Labour government will have to make cuts too,’ he added.

‘There will be no more borrowing for day-to-day spending. Any changes to the current spending plans for that year will be fully-funded and set out in advance in our manifesto.’

Balls said the party’s zero-based review of public spending would root out waste and inefficiency, and would apply to every government department, including any the party decided to ringfence from spending cuts.

‘And we will look at new ways of delivering public services suited to tougher times ¬– while ensuring that they continue to make a huge contribution to the strength of our economy and the fairness and stability of our society,’ he added.

‘This will allow the government to balance the books and deliver a surplus on the current budget and falling national debt in the next Parliament.’

Labour’s pledge to run a current budget surplus comes after Osborne pledged to run a total surplus – also including capital spending – by the end of the next Parliament. 

However, Balls said the government’s forecasts had been ‘discredited’ by the rolling five-year targets, which had moved the time the government forecast to eradicate the defect from 2015/16 to 2018/19.

Responding to the speech, financial secretary to the Treasury Sajid Javid claimed the last Labour government had spent and borrowed too much in the years of high economic growth.

‘But Ed Balls thinks the deficit was not too high at the time, and says he would do it all over again,’ he added.

‘It's the same old Labour. They have no long-term economic plan for the future. All they offer is more spending, more borrowing and more taxes. That would put the recovery and jobs at risk. Our country and hardworking people would pay the price with a less financially secure future.’


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