Brown acts to beat Tory 'tax and spend' jibes

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Gordon Brown, the Shadow Chancellor, will tomorrow set out strict new criteria designed to ensure his party's fiscal policy will not again be vulnerable to Tory charges that tax and spending will lurch out of control.

In what is being billed as the most important speech Mr Brown has yet made on macro-economic policy, he will lay out a series of "Brown's laws" intended to underline the party's commitment not to repeat what the new leadership sees as the mistakes of the 1992 election campaign.

Mr Brown was in the forefront of the argument that by entering into huge commitments on the uprating of pensions and child benefit between 1987 and 1992, it was forced into tax commitments to pay for them which then alienated the electorate.

The Shadow Chancellor will include in a speech - which will set out for the first time a Labour government's approach to monetary policy - a section on tax which will promise a "golden rule" that government borrowing should not on average exceed public investment over the course of an eco- nomic cycle.

There will be a commitment to keep public-sector debt as a proportion of Gross Domestic Product at less than 60 per cent over the economic cycle - the maximum ratio spelt out in the Maastricht criteria as a qualification for an EU member state to enter a single currency.

The rule would help to ensure that the UK could limit public borrowing below the ceiling of 3 per cent of GDP, also required as a qualificiation of EMU membership.

And Mr Brown will set out a new edict for Labour policymakers that all public investment and spending decisions will have to be justified by being demonstrably cost-effective.

At the same time, Mr Brown intends to broaden the remit of the so-called "Seven Wise Men" - the economic panel of experts advising the government so that they can comment annually on whether a Labour government was fulfilling its own criteria.

And he has developed the embryonic plans of John Smith, his predecessor as Shadow Chancellor, for opening up the Budget-making process. He intends to publish a summer "green" Budget - a consultative economic paper - which would pave the way for a public debate about what would be included in the November Budget.

The tough line on spending will underline a requirement already made by Tony Blair, the Labour leader, and Mr Brown - that before considering their own programmes each departmental minister should examine what savings he could find in existing governmental spending plans.

nSeveral prominent Labour left-wingers, including Clare Short, the shadow Minister for Women, have backed Tony Blair's plan to avoid putting a figure on the party's promise of a national minimum wage until after the next general election.

A motion which also supports the leadership's idea of consulting employers before setting the level has attracted the signatures of 37 Labour MPs.

The motion, circulated by Denis MacShane, MP for Rotherham, expresses support for the campaign by Harriet Harman, Labour's employment spokeswoman, for a "dialogue following a change of government between employers and unions about the level at which the minimum wage should be set".

Bill Morris, the leader of the transport workers' union with the second- largest block vote at the Labour conference, last week described the plan to consult employers as "like putting Dracula in charge of a blood bank".

to have had a "blazing row" with Labour front-benchers on the party's Economic Commission at its inconclusive meeting last Thursday.

A meeting of the informal "contact group" between the Trades Union Congress and the Labour Party yesterday, designed to try to resolve the deadlock, broke up without agreement.

One of the signatories of Mr MacShane's motion, Neil Gerrard (Lab, Walthamstow), who is a member of the left-wing Campaign Group, reversed his position to say last night that he did actually want a figure before the next election. But he agreed with "99 per cent" of the motion, and said that he had "no problem with having some sort of mechanism to consult employers - if you could get wider agreement, then fine, why not?"

Ms Harman believes that her hand has been strengthened in negotiations with unions by the discovery that the International Labour Organisation convention - which the Conservative government repudiated but which Labour supports - requires consultation between "social partners" in setting the level of minimum wages.

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