Labour conference: pay cut for ministers, child benefit cap, but more NHS cash

http://www.theguardian.com/politics/2014/sep/21/ed-balls-ed-miliband-labour-pledge-next-parliament

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Ed Balls, the shadow chancellor, will underscore his willingness to take tough fiscal decisions when he reveals he will cap child benefit increases at 1% for the first two years of the next parliament, and force all government ministers to take a symbolic 5% pay cut.

Balls, battling to improve Labour's economic credibility in the polls, will defend his decision to back a fiscal stimulus in 2010, but will recommit himself to balancing the books in the next parliament, including by keeping child benefit rises below the rate of inflation and slashing ministers' pay by £6,708 a year.

His announcement will come in his speech to the Labour party conference in Manchester on Monday, as Labour sources were also making it increasingly clear that the party will this week commit extra funds for the national health service, possibly by earmarking cash raised by reintroducing the 50p top rate of tax.

The Labour leader, Ed Miliband, said on Sunday: "I am deeply worried about the NHS in the next parliament. We are certainly going to make sure it does not lose money and we want to do more than that. We will be saying more about that between now and the election." He reiterated his promise to reinstate the 50p top rate of income tax and a levy on homes above £2m, saying these taxes would raise substantial sums.

But he ruled out generalised tax rises to pay for the NHS, saying: "If you are asking 'do I think we should be somehow raising taxes now on everyday working people', I am very wary of that. My government is determined to tackle the cost of living crisis [and] if we are elected in May that is what we are going to do."

The reference to everyday working people leaves him scope to raise other taxes. Miliband said Labour's decision to raise the minimum wage to £8 an hour by 2020 could save hundreds of millions by reducing the benefits and tax credits bill. The Confederation of British Industry (CBI) criticised the plan as undermining the independence of the Low Pay Commission, and profits and competitiveness.

With Labour trailing the government on economic credibility, Balls will recommit himself to balancing the books, saying: "We will get the current budget into surplus and the national debt falling as soon as possible in the next parliament." The Conservatives have the public finances on a trajectory to reach a surplus of £28bn by 2018-19, so Balls still has room to spend billions more than the Conservative plan.

Two thinktanks, the Institute for Fiscal Studies (IFS) and the Resolution Foundation, have pointed out that differences between the Labour and Conservative rules would give Balls scope to spend more than the government over the parliament, through higher current and capital spending. The constraint in Labour's capital spending comes through Balls's additional commitment to reduce national debt (which incorporates capital spending) as a share of national income.

In his speech, Balls will promise to "legislate for these tough fiscal rules in the first year after the election and they will be independently monitored by the Office for Budget Responsibility".

The commitment to cap child benefit increases at 1% in the first two years of the parliament will save £400m over the course of the parliament, taking into account that the coalition is already committed to the same 1% freeze in 2015-16.

Balls will say: "I want to see child benefit rising again in line with inflation in the next parliament, but we will not spend money we cannot afford. So for the first two years of the next parliament we will cap the rise in child benefit at 1% … all the savings will go towards reducing the deficit. People know we are the party of jobs, living standards and fairness for working people. But they also need to know we will balance the books and make the sums add up."

He will also defend his decision to restore the 50p top rate of tax, saying that "unlike the Tories we will always ask those who have the most to make the biggest contribution. Now cannot be the right time to give the richest 1% of people in the country a £3bn tax cut".

He will also insist he did not make the wrong economic judgment in backing a fiscal stimulus in 2010-11. He will say: "Three years of lost growth at the start of this parliament means we will have to deal with a deficit of £75bn – not the balanced budget George Osborne promised by 2015. And that will make the task of governing hugely difficult."

Tories claim a ministerial pay cut amounts to 0.003% of the deficit and that Balls's rules will allow him an extra £28bn in borrowing. Priti Patel, the Treasury Exchequer Secretary, said: "This speech is not a serious plan for the economy – Labour would put the deficit up and not down."

Owen Jones, page 29 ⇾

Leader comment, page 30 ⇾