By Richard Johnstone | 11 December 2014
Ed Miliband has warned that a Labour government elected next May would need to cut government spending every year until the current budget deficit in the public finances is closed.
Setting out his party’s plan to run a surplus in current spending by 2020, Miliband said the party would make different choices from Chancellor George Osborne to balance the books. These would include introducing a ‘mansion tax’ on properties worth more than £2m and reinstating the 50p income tax rate on earnings over £150,000 a year.
He also pledged that the party would be clear about its plans for spending.
‘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.’
Miliband said shadow chancellor Ed Balls had today written to all shadow cabinet members to tell them to prepare for falling budgets, as part of the party’s zero-based budget review, which is re-examining all public spending. This has already backed local government reorganisation and called for more state-owned property to be sold off.
The Labour leader said he rejected the idea that the deficit should not be the party’s concern.
Unless there was a plan in place for dealing with the deficit, it would be working people who would pay the price of the economic instability that is created, he warned.
‘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.’
However, he said Labour’s plan to balance the current budget, rather than Osborne’s plan for an absolute surplus, would allow capital investment in economic infrastructure to continue. The zero-based review would also allow for ‘sensible reductions in spending’ and not ‘slashing and burning’ public services, he added.
‘This is the central contrast between our approach and the Conservatives.
‘We won’t take risks with our public finances. And we won’t take risks either with our public services, our National Health Service.’
Responding to Miliband’s speech, Conservative business minister Matthew Hancock said Labour’s proposal to only balance current spending meant its policy was ‘to run deficits forever’.
He added: ‘That would mean more debt than hardworking taxpayers or our children could ever hope to repay.’
