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Ed Balls clarifies Labour position over pension spending Ed Balls clarifies Labour position over pension spending
(4 months later)
Ed Balls has clarified Labour's pensions policy after he said the state pension would be included in a three-year cap on welfare spending it would introduce after a general election victory in 2015.Ed Balls has clarified Labour's pensions policy after he said the state pension would be included in a three-year cap on welfare spending it would introduce after a general election victory in 2015.
In a what appeared to be a major change of tack, the shadow chancellor said pensions would be included in the Labour plan because welfare payments have to be considered "across the piece".In a what appeared to be a major change of tack, the shadow chancellor said pensions would be included in the Labour plan because welfare payments have to be considered "across the piece".
Amid Tory claims that Labour was planning to target pensions, Balls said that Labour is committed to the pension "triple lock". This says that the state pension will rise by the highest of either average UK earnings, the rise in CPI inflation or a standard rise of 2.5%.Amid Tory claims that Labour was planning to target pensions, Balls said that Labour is committed to the pension "triple lock". This says that the state pension will rise by the highest of either average UK earnings, the rise in CPI inflation or a standard rise of 2.5%.
Balls tweeted: "We committed to triple-lock on state pension – got to monitor long-term pension spend – Tory reaction very rattled."Balls tweeted: "We committed to triple-lock on state pension – got to monitor long-term pension spend – Tory reaction very rattled."
His tweet came after Matt Hancock, the business minister and former chief of staff to George Osborne, tweeted: "Amazing: Balls admits that when Labour say they will cap benefits, what they mean is they will cap pensions of people who have worked hard."His tweet came after Matt Hancock, the business minister and former chief of staff to George Osborne, tweeted: "Amazing: Balls admits that when Labour say they will cap benefits, what they mean is they will cap pensions of people who have worked hard."
In a second tweet Hancock added: "Balls: Labour will target pensioners who have worked hard their whole lives. We will cap benefits for those who want something for nothing."In a second tweet Hancock added: "Balls: Labour will target pensioners who have worked hard their whole lives. We will cap benefits for those who want something for nothing."
Labour moved to clarify its position after Balls highlighted the depth of the change in Labour thinking on spending when he told the Sunday Politics on BBC1 that pensions would be included in the Labour cap.Labour moved to clarify its position after Balls highlighted the depth of the change in Labour thinking on spending when he told the Sunday Politics on BBC1 that pensions would be included in the Labour cap.
Ed Miliband announced on Thursday that a Labour government would impose a three-year cap on welfare spending not linked to the fluctuating economic cycle. The largest part of welfare spending in the so called "structural" part of government spending, known as annually managed expenditure (AME), are pensions.Ed Miliband announced on Thursday that a Labour government would impose a three-year cap on welfare spending not linked to the fluctuating economic cycle. The largest part of welfare spending in the so called "structural" part of government spending, known as annually managed expenditure (AME), are pensions.
Balls told the Sunday Politics: "As for pensioners I think this is a real question. George Osborne is going to announce his cap in two weeks time. I don't know whether he will exclude pension spending or include it. At the moment our plan is to include it."Balls told the Sunday Politics: "As for pensioners I think this is a real question. George Osborne is going to announce his cap in two weeks time. I don't know whether he will exclude pension spending or include it. At the moment our plan is to include it."
The shadow chancellor said pensions would be included in the cap because "all welfare spending" is being examined. "Personally, I actually think it's important to look across the whole welfare state to say what are the drivers of expenditure," he said. "I think many people who are watching your programme would not realise that actually today the clear large bulk, the majority of most welfare spending is in fact going to people over 60. That's the truth and we should look across the piece."The shadow chancellor said pensions would be included in the cap because "all welfare spending" is being examined. "Personally, I actually think it's important to look across the whole welfare state to say what are the drivers of expenditure," he said. "I think many people who are watching your programme would not realise that actually today the clear large bulk, the majority of most welfare spending is in fact going to people over 60. That's the truth and we should look across the piece."
Labour sources said it was correct to say that most pension spending was structural and so it would be included in the three-year cap. But this would not lead to a great deal of change in light of the "triple lock" for pensions.Labour sources said it was correct to say that most pension spending was structural and so it would be included in the three-year cap. But this would not lead to a great deal of change in light of the "triple lock" for pensions.
One senior source said: "Pension spending is technically structural because it does not go up with the economic cycle. But it is also structural spending that is controlled by the triple lock which means the room for manoeuvre is limited. Pensions should be included in the cap but it is a pretty immovable part of the cap."One senior source said: "Pension spending is technically structural because it does not go up with the economic cycle. But it is also structural spending that is controlled by the triple lock which means the room for manoeuvre is limited. Pensions should be included in the cap but it is a pretty immovable part of the cap."
Miliband believes the more significant elements of spending he would like to target in the cap are housing benefit and worklessness. He wants to redirect the housing budget to focus on building more homes rather than allowing the budget to be dominated by housing benefit.Miliband believes the more significant elements of spending he would like to target in the cap are housing benefit and worklessness. He wants to redirect the housing budget to focus on building more homes rather than allowing the budget to be dominated by housing benefit.
Labour's decision to impose a cap on welfare spending follows the announcement by the treasury at the time of the budget that it would seek to impose a cap on the structural AME. But the treasury made clear in March that it remained committed to the pension "triple lock".Labour's decision to impose a cap on welfare spending follows the announcement by the treasury at the time of the budget that it would seek to impose a cap on the structural AME. But the treasury made clear in March that it remained committed to the pension "triple lock".
Balls said that Labour was having to take tough decisions in light of the poor performance of the economy. He said: "People know that because the inheritance is going to be much tougher than any of us wanted, because the government's plan has failed, Labour's saying that we're going to have to face up to that tough inheritance and make very difficult decisions.Balls said that Labour was having to take tough decisions in light of the poor performance of the economy. He said: "People know that because the inheritance is going to be much tougher than any of us wanted, because the government's plan has failed, Labour's saying that we're going to have to face up to that tough inheritance and make very difficult decisions.
"We're saying loud and clear to anybody out there who thinks a Labour government next time round will be like the last Labour government, able to say we're going to be increasing spending; spending will be falling for departments – we'll have to make tough decisions, we'll have to be rigorous about priorities, it's going to be very hard, but we will do things in a more balanced and a fairer way.""We're saying loud and clear to anybody out there who thinks a Labour government next time round will be like the last Labour government, able to say we're going to be increasing spending; spending will be falling for departments – we'll have to make tough decisions, we'll have to be rigorous about priorities, it's going to be very hard, but we will do things in a more balanced and a fairer way."
A Labour spokesman said: "Labour supports the 'triple lock' on the state pension. But as Ed Balls said it would be perverse to exclude overall spending on pensioners and the impact of an ageing society from any sensible and long-term fiscal plan to monitor and control structural social security spending.A Labour spokesman said: "Labour supports the 'triple lock' on the state pension. But as Ed Balls said it would be perverse to exclude overall spending on pensioners and the impact of an ageing society from any sensible and long-term fiscal plan to monitor and control structural social security spending.
"That's why we have supported increases in the retirement age as people live longer and why we have also said we would not pay the winter allowance to the richest 5% of pensioners."That's why we have supported increases in the retirement age as people live longer and why we have also said we would not pay the winter allowance to the richest 5% of pensioners.
"We will look at the details of the government's cap when it is announced in the spending review as we develop the details of our own.""We will look at the details of the government's cap when it is announced in the spending review as we develop the details of our own."
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