Ed Balls: A Labour government would show an 'iron discipline' on the economy

The Shadow Chancellor of the Exchequer, Ed Balls MP has outlined some plans and priorities for an incoming Labour government and stressed he would bring an "iron discipline" if Labour are elected to power at the next general election.

In a speech to an audience at the media giant, Thomson Reuters in London, Mr Balls said that Labour would cut winter fuel payments for the richer members of the UK's elderly population. This would affect approximately 600,000 people who pay higher and top income tax rates, saving about £100m.

While he stopped short of saying that Labour would stick to the coalition's spending plans, arguing that he could not predict the financial circumstances he would inherit; the Shadow Chancellor did argue, when questioned, that it would be "completely irresponsible" to commit his party to higher spending in 2015/16 in economic conditions he described as "bleak".

Seeking to provide an overarching philosophy on the economy, Mr Balls said: "We will match an iron discipline on spending control with a fairer approach to deficit reduction."

"The situation we will inherit will require a very different kind of Labour government to those which have gone before," he said.

"We will inherit a substantial deficit. We will have to govern with much less money around. We will need to show an iron discipline."

The Chancellor George Osborne is expected to announce details of the government's future spending plans for 2015/6 this month, effectively marking out the economic territory for the general election debate.

Among Labour's other proposals to reduce spending, Mr Balls hinted at curbs on further free schools, changes to the coalition's introduction of elected police commissioners and a mansion tax:

"With primary school places in short supply in many parts of the country, and parents struggling to get their children into a local school, can it really be a priority to open more free schools in 2015 and 2016 in areas with excess secondary school places," he said.

"When we are losing thousands of police officers and police staff, how have we ended up spending more on police commissioners than the old police authorities, with more elections currently timetabled for 2016?

"With family budgets under such pressure and living standards falling, surely it makes sense to introduce a mansion tax on properties worth over £2m to pay for a lower 10p starting rate of tax."

He also warned that a Labour government would expect to "work within" current forecasts in its first year and faced "a bleak inheritance". He promised a "tough deficit reduction plan" together with action to strengthen growth, arguing that the government should follow the advice of the International Monetary Fund (IMF) that the UK should increase infrastructure spending in the short term to boost growth.

Mr Balls accused George Osborne of economic policies that had "failed catastrophically" on growth, jobs and deficit reduction. But he also underlined the constraints under which he would have to operate if Labour were in power:

"This is the hard reality. The last Labour government was able to plan its 1997 manifesto on the basis of rising departmental spending in the first years after the election. The next Labour government will have to plan on the basis of falling departmental spending."

Commentators suggest the plan to cut winter fuel allowance for wealthier pensioners is a symbolic break with Labour's historic commitment to the principle of universality for certain benefits, and is aimed to signal the party's intentions to follow tough fiscal plans if elected.

However, a Treasury spokesperson told the BBC that the policy was "utterly meaningless" and would save just 0.5% of the welfare budget.

"Ed Balls has just confirmed he wants to borrow and spend even more now - exactly what got us into this mess in the first place," said the source.

Others have suggested that Labour's decision to limit winter fuel payments will open the party up to questions about its commitment to other universal benefits for the elderly such as free bus passes and TV licences.

The coalition have already reformed another previously universal allowance - restricting child benefit by removing it from some higher earning families.

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