Ed Miliband is under mounting Labour pressure to adopt a tougher line on welfare in an attempt to reassure voters about his plans to spend more than the Conservatives if the party regains power.
Blairites are prepared to support a 2015 election pledge for higher spending on major projects such as housebuilding - but want Mr Miliband to tackle the perception that the party is “soft” on benefit claimants in return. They also want Labour to set out soon a firm timetable for tackling the deficit.
The Independent disclosed that Labour is preparing to pledge at the next election to spend more than the Tories as part of a “new economic settlement”. That would mean no repeat of New Labour’s landmark promise before the 1997 election to stick to the Tory Government’s spending plans for its first two years in power.
Afterwards Ed Balls, the shadow Chancellor, insisted that no decision had been taken “now” to outspend the Tories but left the option open. He told LBC 97.3 radio in London it would be “totally irresponsible” to set out Labour’s tax and spending plans two years before an election. “We don’t know how badly the economy is going to be then. We’re going to be spending much more than we wanted to because he [George Osborne] can’t get unemployment down. We don’t know where we will be in two years’ time,” he said.
One shadow minister said: “We cannot take a final decision until we know how much the Coalition would spend. But our direction of travel is clear – to spend more on investment in order to rebuild Britain.”
Lord Mandelson, the Blairite former Cabinet minister, said : “If Labour wants to fight the next election with the pledge of more capital spending, the party will need to keep a sharp eye open for any adverse market reaction as the continuing high level of debt as proportion of GDP could weaken confidence. The party also needs to show where it will be tough elsewhere, for example on public sector pay and welfare spending."
Although Labour has pledged to dock benefits of the long-term unemployed if they turn down a government-guaranteed job, some frontbenchers are worried that the party is in danger of losing the argument on welfare and, in turn, on the deficit. Simon Danzcuk, Labour MP for Rochdale, said that “spending my childhood on benefits made me realise it can easily become a destructive comfort blanket, which does as much harm as good.”
Miliband aides said Labour would set out in its own time “a different course on welfare reform to ensure people who can work do so.”
Some Blairites had hoped that Labour would stick within the Coalition’s spending ceiling for the post-2015 period and cut the cake differently. The Progress group said Labour should “adopt the Coalition’s spending limits for the first two years of the next parliament, the period over which the deficit is supposed to be eliminated. As it did in 1997, such an announcement will reassure the voters that Labour will, in the words of the party’s manifesto at the time, ‘be wise spenders, not big spenders’.”
The Tories seized on The Independent’s report. Launching his party’s local election campaign in Nuneaton, David Cameron said: “The Labour leader is turning left. More spending. More borrowing. More debt. More of all those things that got us into this mess.” Grant Shapps, the Tory chairman, said: "We've always known Labour don't get it. It has always wanted more spending, more borrowing and more debt. And now it has explicitly confirmed that it will spend more. It is a left-wing party that would take Britain back to the brink of bankruptcy."