My letter to the Shadow Cabinet

Dear Shadow Cabinet colleague,

As we discussed yesterday, the Autumn Statement confirmed that David Cameron and George Osborne have now broken all of their promises on the economy.

They promised people would be better off, but while those earning over £150,000 have been given a £3 billion a year tax cut, working people are now on average £1,600 a year worse off since 2010.

The continuing squeeze on living standards has led to tax revenues falling short, which is why George Osborne has had to admit that his promise to balance the books by next year will be broken. He is now set to have borrowed £219 billion more than he planned and government borrowing next year is forecast to be £75 billion.

This presents a huge challenge for the next Labour government. As Ed Miliband and I have said, we will balance the books where this government has failed and do so in a fairer way. We will cut the deficit every year, and deliver a surplus on the current budget and falling national debt as soon as possible in the next Parliament. But we will take a different approach to balancing the books than the Tories.

It’s now clear the Tories have abandoned any pretence of being in the centre-ground with an increasingly extreme and unbalanced plan. They have made an ideological choice to pencil in deeper spending cuts for the next Parliament because they are refusing to ask those with the broadest shoulders to make a greater contribution and, crucially, are ignoring the need for a plan to deliver the rising living standards and more good jobs that are vital to getting the deficit down.

In contrast, Labour will take a tough but balanced approach to getting the deficit down. Our economic plan will deliver the rising living standards, more good jobs and stronger and more balanced growth which are a vital part of any fair and balanced plan to get the deficit down.

We will make different and fairer choices from the Tories, including reversing this government’s £3 billion a year tax cut for people earning over £150,000 and taking action to close tax loopholes and introducing a mansion tax on properties worth over £2 million in order to help save and transform our National Health Service.

And unlike George Osborne, we will not make any spending or tax commitments without saying where the money is coming from.

But as we have discussed a balanced plan to reduce the deficit will also require spending cuts.

We have already set out a number of the difficult decisions we will have to take, including scrapping the winter fuel allowance for the richest five per cent of pensioners, cutting Ministers’ pay by 5 per cent and capping child benefit rises at one per cent for two years.

We have already made clear that the NHS will be a priority for the next Labour government – including with our plans to raise £2.5 billion a year for Time to Care Fund, on top of the Tory spending plans we inherit. We also have a long-standing commitment to spending 0.7% of national income on overseas development aid. We will set out for our manifesto other priority areas of spending which will be protected.

In the meantime you should be planning on the basis that your departmental budgets will be cut not only in 2015/16, but each year until we have achieved our promise to balance the books.

Of course all departments have been taking part in the Zero-Based Review of every pound spent by government, because even priority areas of spending which will be protected should be looking for waste and efficiencies that mean resources can be prioritised for the frontline.

A number of departments have already shown how, in the context of reduced budgets in the next Parliament, they can make different choices which will allow frontline services to be better protected. For example, the Shadow Home Affairs team has set out how it will make nearly £250 million of savings – including by scrapping elected Police and Crime Commissioners and mandatory joint purchasing of equipment by police forces – in order to better protect frontline policing.

Chris Leslie’s cross-departmental work has also set out how we will look to sell government buildings and assets where there is a value for money case for doing so and seek to move more civil service jobs out of London in order to help make savings and rebalance our economy too.

We will be publishing further interim reports from the Zero-Based Review in the coming weeks and months.

These are the elements of Labour’s tough but balanced and fair plan to get the deficit down: a credible and sensible goal for balancing the books, a plan to change our economy, making tough but different choices on spending and taxation, ensuring those with the broadest shoulders bear the greatest burden, and not making any unfunded spending or tax commitments.

It is in sharp contrast to a Tory approach which has failed in this Parliament and which is set to be increasingly unbalanced and extreme if they win the election.

Yours sincerely,

Ed Balls

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Posted December 11th, 2014 by Ed

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