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| Labour may leave decision on deficit reduction plan until election runup | |
| (34 minutes later) | |
| Labour may delay the politically critical choice on whether to match the coalition's deficit reduction plan until months before the 2015 general election, according to party sources. | |
| The Tories are hoping to put pressure on Labour in this June's summer spending review, covering the post-election period, to reveal how quickly Ed Miliband would tackle the deficit if elected prime minister. | |
| However, the shadow chancellor, Ed Balls, may argue the exceptional volatile state of the economy would make such an early judgment premature. | |
| Labour sources point out Tony Blair and Gordon Brown did not decide to accept the first two years of the Conservatives' planned public spending limits until four months before Blair's election victory, and Miliband and Balls could follow a similar timetable. | Labour sources point out Tony Blair and Gordon Brown did not decide to accept the first two years of the Conservatives' planned public spending limits until four months before Blair's election victory, and Miliband and Balls could follow a similar timetable. |
| The speech by then shadow chancellor Brown in January 1997 committing Labour to follow the totals set down by the Conservative prime minister John Major was largely written by Miliband, a special adviser to Brown at the time. | The speech by then shadow chancellor Brown in January 1997 committing Labour to follow the totals set down by the Conservative prime minister John Major was largely written by Miliband, a special adviser to Brown at the time. |
| Labour would also prefer the debate around this summer's spending review to be focused on the coalition's failed economic strategy and extra borrowing, rather than a discussion of whether Labour accepts the pace of the coalition's deficit reduction plan, or what specific cuts it would implement. | Labour would also prefer the debate around this summer's spending review to be focused on the coalition's failed economic strategy and extra borrowing, rather than a discussion of whether Labour accepts the pace of the coalition's deficit reduction plan, or what specific cuts it would implement. |
| In the next few months it is likely that Labour will set out in greater detail what its economic priorities will be after 2015 if elected, rather than just setting out what it would do if it was in power now. | In the next few months it is likely that Labour will set out in greater detail what its economic priorities will be after 2015 if elected, rather than just setting out what it would do if it was in power now. |
| Miliband's speech in Bedford in February, which borrowed language from Barack Obama, showed a commitment by Labour to infrastructure spending, training and child care, as well as changes in the burden of taxation . | Miliband's speech in Bedford in February, which borrowed language from Barack Obama, showed a commitment by Labour to infrastructure spending, training and child care, as well as changes in the burden of taxation . |
| The spending review will set out departmental spending cuts for 2015-16, and the mix of tax rises and further cuts through to 2017-18 – the point at which the Treasury now says it can eradicate the structural deficit, the coalition's main fiscal target. | The spending review will set out departmental spending cuts for 2015-16, and the mix of tax rises and further cuts through to 2017-18 – the point at which the Treasury now says it can eradicate the structural deficit, the coalition's main fiscal target. |
| The Institute for Fiscal Studies says this will require expenditure cuts in unprotected Whitehall departments of 7.6% between 2015 and 2017, assuming no further tax increases or welfare cuts. | |
| This represents deeper annual cuts than in this parliament, and on the surface is unlikely to be endorsed by Labour, given its claim that the current spending cuts go too far and too fast. | |
| But some shadow cabinet sources fear the strategy of delay is risky if the public becomes impatient over the next 12 months for Labour to offer solutions instead of critiques. | But some shadow cabinet sources fear the strategy of delay is risky if the public becomes impatient over the next 12 months for Labour to offer solutions instead of critiques. |
| Moreover, polls consistently show voters still sceptical that Balls and Miliband are tough enough to impose painful cuts, so, regardless of the eventual overall decisions on deficit reduction, shadow ministers will be asked to give symbolic examples of spending cuts they endorse. | Moreover, polls consistently show voters still sceptical that Balls and Miliband are tough enough to impose painful cuts, so, regardless of the eventual overall decisions on deficit reduction, shadow ministers will be asked to give symbolic examples of spending cuts they endorse. |
| At the moment few Labour frontbenchers are proposing cuts. The Tories have already challenged Balls to say if he will accept a further slowdown in public sector pay. Labour is also looking at the perks of middle-class pensioners. | At the moment few Labour frontbenchers are proposing cuts. The Tories have already challenged Balls to say if he will accept a further slowdown in public sector pay. Labour is also looking at the perks of middle-class pensioners. |
| However, Miliband is also being urged to state that he will not follow the Brown-Blair precedent by accepting the coalition's spending targets. | However, Miliband is also being urged to state that he will not follow the Brown-Blair precedent by accepting the coalition's spending targets. |
| Former ministers, notably Peter Hain, have already suggested there is no case for matching Tory spending plans. | Former ministers, notably Peter Hain, have already suggested there is no case for matching Tory spending plans. |
| He argued in the Guardian recently: "When Labour signed up, before 1997, to the then Tory spending plans, the economy was growing, not slowing. Our pledge was designed to reassure voters that we could be trusted to be prudent with the benefits of that growth. | He argued in the Guardian recently: "When Labour signed up, before 1997, to the then Tory spending plans, the economy was growing, not slowing. Our pledge was designed to reassure voters that we could be trusted to be prudent with the benefits of that growth. |
| "But today the economy is stagnating. Economic credibility will not come from talking tough about continually tightening the squeeze when what the economy desperately needs is a stimulus." | "But today the economy is stagnating. Economic credibility will not come from talking tough about continually tightening the squeeze when what the economy desperately needs is a stimulus." |
| That view is strongly supported in the unions. | That view is strongly supported in the unions. |
| Either way the scale of the post-2015 deficit challenge is becoming more stark. The government spending watchdog, the Office for Budget Responsibility, has forecast growth in the short run of 0.6% in 2013 and 1.8% for 2014. That is a downgrade revision of 0.6% and 0.03%. | Either way the scale of the post-2015 deficit challenge is becoming more stark. The government spending watchdog, the Office for Budget Responsibility, has forecast growth in the short run of 0.6% in 2013 and 1.8% for 2014. That is a downgrade revision of 0.6% and 0.03%. |
| In last year's budget, Osborne predicted that government debt would peak at 76% of GDP in the fiscal year 2014/15; but this year he projected the government's debt burden to keep rising for a further two years, to 86% in 2016/17. | In last year's budget, Osborne predicted that government debt would peak at 76% of GDP in the fiscal year 2014/15; but this year he projected the government's debt burden to keep rising for a further two years, to 86% in 2016/17. |
| If elected, Balls would be open to change the mix between tax rises and spending cuts, as well as to lift the protection of expenditure in some departments. | If elected, Balls would be open to change the mix between tax rises and spending cuts, as well as to lift the protection of expenditure in some departments. |