Labour is to harden its line on the need to clear the deficit in response to Wednesday's Budget as it distances itself from the economic policies pursued under Ed Miliband.
Rachel Reeves, the shadow Work and Pensions Secretary, has said that Labour should set a target date for getting national debt back to its 40 per cent of GDP level before the 2007 financial crisis. It stands at more than 80 per cent today, so halving it would imply huge spending cuts.
Ms Reeves, who has been tipped to become shadow Chancellor if the front-runner Andy Burnham wins the Labour leadership contest, said: “We will need to be clearer than we were at the last election about a timetable for getting the deficit down.” She added: “The approach Labour committed to before the election would have seen debt still above 65 per cent [of GDP] in 2030.”
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Labour has already ditched Mr Miliband’s plan to raise the top rate of income tax from 45p to 50p on incomes over £150,000 and his proposed mansion tax on homes worth more than £2m.
In her first comments since having her second baby, Ms Reeves backed George Osborne’s proposed law saying the Government should run a budget surplus in good economic times. “Labour should commit to run a surplus when the economy is growing at or above its normal level, allowing us to bring the debt down more quickly,” she said.
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In an attempt to shed its image as the “welfare party,” Labour will back Mr Osborne’s plans to reduce the £26,000 cap on the amount of benefits one family can claim in a year after sending conflicting signals on the issue.
“Labour supports a lower benefit cap to ensure our welfare system is fair, affordable and rewards hard work,” said Ms Reeves. But Labour has reservations about the Chancellor’s plans to cut tax credits which top up low incomes.Reuse content