Balls suggests cuts could cause public sector turmoil

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Labour leadership candidate Ed Balls has offered indication that if elected leader in September he will take the party further away from coalition cuts and more in line with those who believe money should not be withdrawn from the economy too soon risking meltdown in the public sector.

The former Chief Economic Advisor has geared himself to mount a more aggressive attack on coalition spending plans when cuts are announced in the autumn’s comprehensive spending review.

Balls denounced the Labour party’s pre-election claim that the deficit can be halved in four years while making the party’s opposition to coalition financial plans more trenchant.

Balls told BBC News the pledge was a “mistake” and that he would have opted for a slower plan to lower the deficit.

In his last budget before leaving the Treasury, Alistair Darling said a Labour government would halve the deficit by 2014, which would have meant cuts of 20% to those spending areas not protected – policing, schools and hospitals.

Balls told the BBC: “Halving the deficit in four years by cutting public spending … I think was a mistake. In government at the time in 2009 I always accepted collective responsibility, but I thought the pace of deficit reduction through spending cuts was not deliverable.”

He also proposed lowering from £150,000 to £100,000 the threshold at which the higher rate of income tax kicks in instead of increasing the rate of VAT.
David Miliband stands firm with Alistair Darling, now shadow chancellor and a supporter of his leadership bid, in backing a ratio of 2:1 spending cuts to tax rises, as opposed to the coalition’s 77:23 split.

Another leadership candidate, shadow health secretary Andy Burnham, said he believed a Tory pledge to ringfence the NHS and increase its spending in real terms year on year was wrong and offered up ways to cut the health budget.



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