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"Sometimes turning points in politics are not obvious on the day, but only in retrospect. We are hoping today is one of these."
'Sometimes turning points in politics are not obvious on the day, but only in retrospect. We are hoping today is one of these." This was the view of a senior Labour policymaker whose fervent hope is that Ed Balls's speech on Monday was such a moment, especially if it is seen as a diptych alongside a linked speech by Ed Miliband on a welfare spending cap on Thursday.
This was the view of a senior Labour policymaker, whose fervent hope that Ed Balls's speech on Monday was such a moment, especially if it is seen as a diptych, alongside a linked speech by Ed Miliband on a welfare spending cap on Thursday.
It will be disastrous for Labour if all this falls flat, and not just because this week has been more than two months in the making. The two Eds are trying to address Labour's biggest and most longstanding polling vulnerabilities – its credibility on borrowing and its willingness to take tough decisions on welfare. If they cannot change perceptions, chances of an overall majority at the next election look slim.
It will be disastrous for Labour if all this falls flat, and not just because this week has been more than two months in the making. The two Eds are trying to address head-on Labour's biggest and most longstanding polling vulnerabilities – its credibility on borrowing and its willingness to take tough decisions on welfare. If they cannot change perceptions on these issues, chances of an overall majority at the next election look slim.
So Balls, the shadow chancellor, in his speech at Reuters, went further than before in setting out thinking on tax and spending, but also tried to set out some symbolic choices he is willing to make to convince voters he would indeed be "an iron chancellor".
So Balls, the shadow chancellor, in his speech at Reuters, went further than before in setting out Labour thinking on tax and spending, but also tried to set out some symbolic choices he is willing to make to convince voters that he would indeed be "an iron chancellor".
With the election still two years away, Balls did not nail down his precise spending plans for the whole of the next parliament. But he has finally indicated that in 2015-16 at least he will accept the coalition's current departmental spending plans, even if he will allow spending switches within departments, and possibly between departments. He has also strongly hinted that this would be a starting point. At the same time, he supports extra capital spending, claiming the new intellectual cover of IMF support for an extra £10bn in infrastructure spending at a time of low interest rates.
"We did not need to provide the whole structure at this stage, but badly needed some guy ropes. I think we have now got them," said one shadow cabinet member who has been privately pressing for action.
Media attention was on Monday focused on ending the winter fuel allowance for the wealthy elderly, but the big message is that he accepts the coalition's planned £11.5bn of departmental spending cuts in 2015-16, and he gave some hints on where they might be found: Whitehall duplication, Titan prisons, extra free school places, regulated industries bearing their own cost of regulation, abolition of elected police commissioners. More is promised. Alongside the £10bn in savings set out by Francis Maude , it may seem puny, but it is a start.
With the election still two years away, Balls did not batten down his precise spending plans for the whole of the next parliament. But he has finally indicated that in 2015-16 at least he will accept the coalition's current departmental spending plans, even if he will allow spending switches within departments, and possibly between departments.
It is also promised that Miliband and Balls recognise now they have made this commitment to follow current departmental spending, they must repeat, expand and re-illustrate this point, rather than retreat back into the comfort zone. If this is to work, shadow cabinet members will have to stop the daily drip of press releases criticising government decisions on the basis that spending is being cut.
At the same time, he supports extra capital spending, claiming the new intellectual cover of IMF support for an extra £10bn in infrastructure spending at a time of low interest rates.
Balls is also slowly letting go his cherished five-point plan for jobs set out two years ago including the emergency one-year cut in VAT. As the economy crawls out of recession, the priority, Balls argues, is not consumer spending, but infrastructure investment, especially housing.
The media attention was on Monday focused on ending the winter fuel allowance for the wealthy elderly, but the big message is that he accepts the coalition's planned £11.5bn of departmental spending cuts in 2015-16 and gave some hints on how they might be found: Whitehall duplication, Titan prisons, extra free school places, regulated industries bearing their own cost of regulation, abolition of elected police commissioners. More is promised in the spring. Alongside the £10bn in savings set out by Francis Maude, it may seem puny, but it is a start.
As the penny drops with Labour, Miliband will need to hold his nerve in the face of internal criticism. Miliband cherishes internal party unity – indeed sometimes unity takes precedence over decisions – but his aides believe he will this time stand his ground.
A similar promise by Balls in January 2012 to be tough on spending, including support for a two-year public-sector pay squeeze, led to a big backlash from the unions. Partly as a consequence and partly faced by an economy mired in recession, Balls spent the subsequent 18 months focusing instead on jobs and growth – politically easier territory than being tough on the deficit. However, unions such as Unite like capital spending since it spells jobs for its members. Their protests this time may be more muted.
It is also promised this time that Miliband and Balls recognise that now they have made this commitment to follow current departmental spending, they must repeat, expand and reillustrate this point, rather than retreat back into comfort zone. If this is to work, shadow cabinet members will have to stop the daily drip of press releases criticising government decisions, on the basis spending is being cut.
So far the Balls speech has been criticised by fuel poverty campaigners, some unions and the former Labour cabinet minister Peter Hain, a critique that Balls privately welcomes since it at least shows him pitted against his party. Tough choices met by universal acclaim in the party are inherently not tough choices.
So far the Balls speech has been criticised by fuel poverty campaigners, some unions and the former Labour cabinet minister Peter Hain, a critique that Balls privately welcomes since it at least shows him pitted against his party. Tough choices met by universal acclaim in the party are inherently not tough choices.
Hain contends the principle of the welfare state is undermined by withdrawing universal benefits, arguing the popular bedrock of the welfare state is the assumption that everyone should equally benefit so long as they contribute.
Hain contends the principle of the welfare state is undermined by withdrawing universal benefits, arguing the popular bedrock of the welfare state is the assumption that everyone should equally benefit so long as they contribute.
In reality the welfare state has always been a muddled mix of universalism and means-testing. After all, Balls and his former mentor, Gordon Brown, were the architects of tax credits, a monument to means-testing.
In reality the welfare state has always been a muddled mix of universalism and means-testing. After all, Balls and his former mentor, Gordon Brown, were the architects of tax credits, a monument to means-testing.
But Miliband will go further on the welfare on Thursday, promising to address the long-term rise in some welfare budgets, such as housing benefit and disability. George Osborne said in the budget he wanted to cap annually managed expenditure, the part of public spending not allocated in fixed budgets to departments. The lion's share is tax credits and social security including pensions, which now account for almost 30% of government expenditure. It is likely Osborne will set a cap on some welfare deep into the next parliament.
But
Miliband aims to put Labour on the front foot in this debate, setting out why welfare has risen and how he would cap some benefit budgets, notably housing benefit and disability benefits.
Miliband will go further on the welfare on Thursday, promising to address the long-term rise in some welfare budgets, such as housing benefit and disability. George Osborne said in the budget he wanted to cap annually managed expenditure, the part of public spending not allocated in fixed budgets to departments. The lion's share is tax credits and social security including pensions, which now account for almost 30% of government expenditure. It is likely Osborne will set a cap on some welfare deep into the next parliament.
Writing in Progress, Nick Pearce, director of the left-of-centre IPPR, and Graeme Cooke, the IPPR research director, foreshadow the argument, saying: "There is a moral obligation on people to take responsibility for their lives and welfare should embody the principle of 'give and take'. However, structural unemployment, a lack of affordable housing, widespread low pay, expensive childcare and inadequate work opportunities for those with disabilities create the conditions for dependency and inflate the benefits bill. By addressing symptoms only, the coalition is set to oversee a £35bn rise in welfare spending by 2017-18 compared to the start of the parliament, despite £2bn of tactical, populist cuts.
So Miliband will promise in some way to cap the structural welfare bill, as opposed to the cyclical bill caused by recession. With luck he will phrase this in a sufficiently populist way that voters can understand it, but without sparking an internal revolt. By the end of the week, it will be clear if he has pulled it all off.
So Miliband will promise in some way to cap the structural welfare bill as opposed to the cyclical bill caused by recession. With luck he will phrase this in a sufficiently populist way that voters can understand, and yet does not spark an internal revolt.
By the end of the week, it will be clear if he has pulled it all off.
