Labour would cut winter fuel payments for rich, says Ed Balls

http://www.guardian.co.uk/politics/2013/jun/03/labour-winter-fuel-ed-balls

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A future Labour government will halt winter fuel payments for 600,000 of Britain's richest pensioners, Ed Balls will say in a speech that represents a significant break with the tone of Labour's previous economic announcements.

Stung by criticism that Labour has failed to come up with concrete policies to address the government's budget deficit, the shadow chancellor will acknowledge the need for a cap on spending and announce a £100m cut in benefits.

The speech follows an intense debate between senior Labour officials over how to address the opposition's perceived failure to win over the public on the economy and offers a broad list of spending priorities, including on infrastructure. The cut has been described by George Osborne's advisers as "utterly meaningless".

In the speech on the UK economy at Thomson Reuters on Monday, Balls will say Labour must begin planning for a "tough inheritance" if it wins the 2015 election.

"When our NHS and social care system is under such pressure, can it really remain a priority to pay the winter fuel allowance – a vital support for middle- and low-income pensioners – to the richest 5% of pensioners, those with incomes high enough to pay the higher or top rates of tax?" he will say.

"Labour believes the winter fuel allowance provides vital support for pensioners on middle and low incomes to combat fuel poverty. That's why we introduced it in the first place. But in tough economic times we have to make difficult choices about priorities for public spending and what the right balance is between universal and targeted support. So at a time when the public services that pensioners and others rely on are under strain, it can no longer be a priority to continue paying the winter fuel allowance to the wealthiest pensioners," he will say.

In words that will worry some of Labour's union backers, Balls will say the party will inherit plans for deep government cuts with a large deficit and rising national debt and will have to adjust its goals accordingly.

"We will have to govern in a very different way and in circumstances very different to what we have known for many years. We will inherit a substantial deficit. We will have to govern with much less money around. We will need to show an iron discipline," he will say.

Balls has previously promised a zero-based spending review after the election, and has also said his deficit reduction plans will be guided by rules overseen by the Office for Budget Responsibility (OBR).

Government officials are privately optimistic that the recovery is going to be stronger than predicted by the OBR, the government spending watchdog, but progress is still vulnerable to the slowdown in the European Union. "The next Labour government will have to plan on the basis of falling departmental spending. Ed Miliband and I know that, and my shadow cabinet colleagues know that too."

A Treasury source said Balls has confirmed that he wants to borrow and spend even more, and that the cut does little to address the deficit. "Ed Balls has just confirmed he wants to borrow and spend even more now – exactly what got us into this mess in the first place," the source said.

"One pledge that saves less than half a per cent of the welfare budget is utterly meaningless when they have pledged to borrow and spend tens of billions more."

Civil servants across Whitehall have saved £10bn for taxpayers by changing the way they work, Francis Maude, the cabinet minister, will claim on Monday.

The savings show the degree by which spending has been reduced, largely compared with 2009-10, the year before the last general election, he will tell a meeting of analysts in Westminster.

Figures published for 2012-13 show that the government has exceeded by 25% the £8bn savings target it set itself after the general election, he will claim.

The efficiency and reform group – a joint Cabinet Office and Treasury initiative – has led a programme to find savings throughout the civil service.

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