Ed Balls has delivered an unequivocal commitment that Labour would eliminate the current budget deficit – and even deliver a surplus – by 2020 in a toughening of the party’s language on the public finances.
The shadow chancellor moved to close off Tory attacks that Labour is failing to set a deadline as he said the end of the next parliament – 2020 – was the party’s definitive “backstop” to eliminate the current budget deficit.
Speaking on the Today programme on BBC Radio 4, ahead of the launch of the Labour manifesto in Manchester, the shadow chancellor said: “Our intention is to get the current budget back into surplus and the national debt falling by the end of the parliament and earlier if we can. I would like to do it faster and get to a bigger surplus but of course that will depend upon what happens to the economy and wages.
“I made a commitment yesterday that our goal will be £7.5bn a year extra coming in from tackling tax avoidance and tax evasion. If we can do that by the middle of the parliament that will enable me to get the deficit down earlier. But clearly that is an ambitious goal. That is why our backstop is: by the end of the parliament unequivocally.”
The current budget generally refers to day-to-day government spending but excludes the capital budget, which generally covers investment in infrastructure projects. In the original coalition promise in the 2010 emergency budget, George Osborne pledged to balance the current budget.
Balls’s statements on thedeficit come as Ed Miliband moves to change the terms of the election campaign by portraying Labour as the party of fiscal responsibility with a guarantee that every policy will be fully funded and will involve no extra borrowing. In one of the boldest moves by a Labour leader since Tony Blair amended clause IV in 1994, Miliband will use the launch of the party’s manifesto to unveil three guarantees in a “budget responsibility lock” including a pledge that the deficit will be cut in every year:
- Every policy outlined in the manifesto will be funded with no additional borrowing. All the major parties will in future have to submit their tax and spending commitments to the Office for Budget Responsibility for auditing – a request that has been rejected by Osborne.
- The first line of Labour’s first budget will declare that it “cuts the deficit every year”. Every subsequent budget will have to abide by this commitment which will be verified by the OBR.
- There will be “strong, fair fiscal rules” to ensure the national debt falls and a surplus is secured as soon as possible in the next parliament.
David Gauke, the treasury minister, said of the Labour manifesto launch: “The independent experts confirm Ed Miliband has no plan to clear the deficit and balance the books. Even Ed Miliband’s own campaign chief admits Labour will borrow more to pay for their unfunded spending promises.
“Everybody knows the SNP will call the tune and force even more borrowing, even more debt and even more taxes on a weak Ed Miliband government. Britain’s hardworking taxpayers will pay the price for the economic chaos.”
Nick Clegg, the deputy prime minister, said: “Ed Miliband and Ed Balls are intent on playing Russian roulette with Britain’s economy
… The fact is, Labour want a return to reckless and excessive borrowing.”
The Labour leadership is aiming to wrong-foot George Osborne, who hopes to portray Labour as fiscally irresponsible, by placing the elimination of the budget deficit at the centre of its manifesto.
Labour believes that the chancellor, who failed on nearly 20 occasions on Sunday to explain how the Tories would fund a commitment to provide an extra £8bn a year to the NHS by 2020, is tripping up by making unfunded commitments. Labour also points out the Tories have failed to explain how they will deliver £12bn of welfare cuts, which account for nearly half of the planned £30bn fiscal consolidation in the next parliament.
The shadow chancellor tried to turn the tables on Osborne by saying that Tory plans to deliver a surplus on the overall budget – current and capital – would be damaging. Balls said: “Our objective is different from George Osborne’s. He wants to go further than me and cover not just current spending but investment spending. Therefore he wants to have an overall budget surplus. That goes beyond balancing the books. It is an extreme objective. It is why he has said he wants to have bigger spending cuts in the next three years than in the last five. Trying to do something that extreme and that fast will backfire.”
But Balls indicated that there may be divisions between the Labour leadership in London and the party’s Scottish leadership when he said that the party’s planned spending cuts in day-to-day government spending may hit Scotland. “Yes there will be cuts outside non-protected areas across all these budgets that will apply in England and Scotland,” he said.
Jim Murphy, the leader of the Scottish Labour party, downplayed claims by the SNP that a Labour government would introduce cuts in Scotland.
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