In a speech to the RSA think-tank, Balls said the forecast from the Office for Budget Responsibility of a £23bn surplus in 2019/20, following Chancellor George Osborne’s Autumn Statement, implied ‘extreme’ reductions.
Prime Minister David Cameron has said the plan would require £30bn in spending reductions, but a Labour analysis found that, once other spending decisions were taken into account, the total reduction needed across services was more than double that.
This was down to what Balls called five hidden factors, including a pledge to boost pensions and capital spending, which would require reductions elsewhere to meet the surplus target. Cameron’s proposal to increase the tax-free personal allowance to £12,500 would also lead to additional cuts, Balls added, to ensure it was revenue neutral.
‘Putting these five hidden factors together, we can see that – in order to keep all their commitments on spending, tax and the deficit – the Tories would in the next five years need to make spending cuts which add up to a staggering total of £70bn.’
Balls said the scale of these reductions was ‘unprecedented’ and Chancellor George Osborne could be forced to either increase taxes or remove the current ringfence from NHS spending as a result.
He pledged that Labour would cut the deficit every year until the current budget was in surplus. Conservative plans go ‘way beyond balancing the books’, he stated.
However, Financial Secretary to the Treasury David Gauke said the government’s spending proposals were forecast by the Office for Budget Responsibility to return day-to-day spending on public services to where it was in 2002/03 in real terms.
‘There is a clear choice at this election: sticking with the competence and stability of David Cameron and the Conservatives’ long-term economic plan that’s securing a better future for Britain – the deficit has been halved, there are 1.85 million more people with the security of a regular wage and the economy is recovering from Labour’s Great Recession.’
Liberal Democrat Chief Secretary to the Treasury Danny Alexander said that Labour planned to borrow too much and the Conservatives would cut too much in the next parliament.
‘The Liberal Democrats have been the rock of financial stability during this recovery,’ he added.
‘We are the only party offering a fair and balanced approach to finishing the job of balancing the books by 2017/18. And we are the only party that has a plan after that point that will allow the investment in our infrastructure and public services needed to build a stronger economy and fairer society.’
