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Ed Miliband unveils Labour pledges on deficit and NHS Ed Miliband makes election pledge to tackle the country’s deficit
(about 2 hours later)
Ed Miliband has unveiled the first of Labour’s five election pledges, promising to cut the deficit every year and secure the future of the NHS. Labour has taken the symbolic decision to make the first of five election pledges a commitment to cut the deficit year on year, but refused to give “an arbitrary date” by which it will be achieved – except to promise it will be as soon as possible in the next parliament.
The full pledge reads: “We will build a strong economic foundation and balance the books. We will cut the deficit every year while securing the future of the NHS. And none of our manifesto commitments will require additional borrowing.” Miliband in a keynote speech also gave himself flexibility by stressing the pledge applied to current deficit and that borrowing for capital investment would be treated differently. But he said there would be no pledges in the manifesto that would require extra capital spending beyond that set out in the autumn statement .
In a speech on Thursday, the Labour leader sought to capture the middle ground on the deficit, saying he would not follow the Conservatives’ plan for cutting total public spending to 35% of GDP. Instead, he promised to reduce spending in most departments year-on-year until the current deficit was eliminated. The willingness to talk about the deficit, after failing to do so in his Labour conference speech, will be welcomed by those in the party who believe it is a precondition for Labour receiving a wider hearing. But Miliband also has to tread a fine line since there is also a constituency of voters that appear to be defecting from mainstream parties on the basis that they are insufficiently radical.
He said Labour was engaged in a fight for the soul of Britain, and asserted that Tory fiscal plans would result in the disintegration of public services. Revealing the party’s first election pledge, he said: “We will build a strong economic foundation and balance the books. We will cut the deficit every year while securing the future of the NHS. And none of our manifesto commitments will require additional borrowing.”
The coalition is expected to publish a charter on budget responsibility, setting a target date to eliminate the deficit by 2017-18, with a vote on the charter in the new year. He also announced that the party’s department-by-department zero-based review had found £500m in efficiency savings.
Labour hopes a broader debate on the deficit has been opened up by the revelation in the autumn statement that the deficit has not fallen as fast as planned due to an insecure labour market and falling living standards, which have in turn reduced tax receipts. Miliband also repeated a pledge first made by the shadow chancellor, Ed Balls, in the Guardian at the weekend that he would cut the current deficit year-on-year until it was in balance, but he insisted he would not set an arbitrary date for when this could be achieved.
More details soon … The speech was also designed to portray the Conservative party’s autumn statement as extreme since it forecast an overall surplus of £23bn by 2019-20, and overall spending as a proportion of GDP falling to its lowest level for 80 years, or 35 % of GDP.
Miliband said this would lead to the disintegration of public services, and vowed Labour was now in a battle for the soul of the country. He said the Tory cuts were the equivalent of more than the whole budget of schools, or three times the budget for social care.
He effectively ruled out Labour increasing VAT and also refused to say if Labour would vote for the government’s charter of fiscal responsibility if, as expected, it calls for the structural current deficit to be eliminated by 2017-18.
He refused to say what he regarded as the right level of public spending as a proportion of GDP.
He also refused to give further details of cuts and rejected a shadow Budget explaining: “If we start picking things out of the air without having done that work, without having gone into the departments and found how we make these changes, how we make these reductions in the most sensible way, then they won’t be the most sensible changes for the country.”
On a possible VAT rise he said: “I would steer you well away from any Labour government raising VAT. It hasn’t happened in the past so I don’t think it’s going to happen in the future.”
He said: “There is a lesson from this parliament about the huge uncertainty there is around deficit reduction. The easy thing for politicians is to claim great certainty when there is not. The right thing to do is to set a clear objective with a realistic destination – balancing the books and the debt falling as soon as possible in the next parliament – and this is what we have done. Nothing does more to undermine credibility than setting an objective and failing to meet it.”
His words on borrowing – although carefully couched – do give him some flexibility. Labour has a rule that debt will fall while the Tories have an investment rule to protect capital spending as a percentage of GDP, a formulation that gives Labour greater flexibility.
Carl Emmerson, of the IFS, said the formulation gives Labour “a lot of wriggle room” since Osborne plans to reach a £23bn overall surplus in 2019-20 and the Tories have plans for investment of £27bn.
He added that the size of government would return to the level of the 1930s and late 1990s, but added this would not mean living standards would be falling to that level.
Chief secretary to the Treasury, Danny Alexander, said the Labour plan means a slow relentless grind of difficult decisions since it might not reach current deficit balance until the end of the parliament, instead of 2017-18 in the Lib Dem plan.
Miliband was asked to sum up his promise to Britain in eight words and immediately came up with an 11-word answer: “A country that works for you, not just the privileged few.”