Exclusive: Labour bets the house with pledge to outspend Tories

Ed Miliband rejects lesson of 1997 when Tony Blair promised to match the Tories' budget limits

Labour is preparing to fight the 2015 election on a bold but risky pledge to spend more than the Conservatives.

Ed Miliband and Ed Balls will reject the more cautious approach – adopted by Tony Blair in 1997 – of sticking to the Tory government’s public spending limits in favour of a “new economic settlement” for Britain.

Some Labour figures believe that repeating Mr Blair’s landmark move would help the party regain economic credibility, on which it still trails the Tories. But there is a growing consensus inside the Shadow Cabinet, which includes its Blairites, in favour of reducing the deficit over a longer period than under the Coalition’s plans in order to finance “investment”, such as a huge house-building programme.

Strong support for this approach will come in a study to be published next week by the Labour-affiliated Fabian Society. Sticking to George Osborne’s plans, it found, would mean that “non-protected” areas of spending such as police, justice and local government face cuts of about 35 per cent between 2011 and 2017.

Arguing the cuts may be unnecessary, the study says that, if the economy is growing by about 2 per cent annually, public spending could rise by 1 per cent a year and Labour could achieve Mr Osborne’s target of seeing debt falling by 2016-17 two years later – or sooner than 2018-19 if taxes were increased.

Mr Miliband is under mounting pressure to reveal how and when Labour would reduce the deficit. Last week, Tony Blair warned that Labour is in danger of becoming a protest party as it opposes Coalition cuts and urged it not to “tack left on tax and spending”. The Miliband-Balls plan to borrow more than the Coalition would is bound to be a seen as a gamble. But the Labour leadership believes that it would pay off if seen as part of a strategy to “rebuild and invest in Britain’s economic future”.

Mr Miliband will argue today, addressing the Scottish Labour conference, that the UK needs a change of direction like the one Margaret Thatcher launched in 1979. “The promise that the majority would always do well from an in-it-for-yourself, laissez-faire, deregulated economy isn’t working for most working people,” he will say.

Accusing both Baroness Thatcher and David Cameron of dividing the country, he will say: “We need to build a new settlement and only Labour can do it. The answer lies in not going back, but in a new settlement appropriate for new times.” Refusing to brand jobless people “scroungers or skivers”, he will say: “We will succeed by uniting our country, not dividing it.”

Andrew Harrop, the Fabian Society’s general secretary, writes in the Fabian Review magazine: “Labour needs to have a credible alternative on the economy that will include targeted cuts in some areas to shift money to higher priorities. But importantly, it must be an alternative on Miliband’s and Balls’s own terms. Lashing themselves to the mast of the Chancellor’s sinking ship is a recipe for economic and political disaster.

“George Osborne’s spending plans are predicated on his and his party’s political commitment to austerity. They make no sense in the short term for our flatlining economy, and they are totally unnecessary for the period after 2015 when overall cuts might not be needed,” Mr Harrop argues.

“The vast majority of people considering voting Labour in 2015 did not vote Conservative at the last election and do not support their spending plans,” Mr Harrop adds.

He warns that matching the Coalition’s plans “will harm the economy, further undermine the welfare state and might not even help Labour’s election chances.”

The Labour leadership will spell out some of its economic priorities for 2015 before Mr Osborne unveils his Spending Review in June. Blairites want a firm timetable announced soon for clearing the deficit, but Mr Balls, the shadow Chancellor, argues it is too early to declare the party’s hand. He wants to delay setting out Labour’s tax and spending plans until the autumn of next year, eight months before the 2015 election. He argues final decisions cannot be taken before then in such an uncertain global climate.

Yesterday, Labour sources insisted no decision had been taken on post- 2015 spending. But Shadow Cabinet members confirmed current thinking was to make investment in spending – such as on housing – a key election dividing line with the Tories.

The history

Politicians and their advisers love to hail their best moves as “game-changers”. In fact, there are few such moments in politics.

In January 1997, however, Gordon Brown, the shadow Chancellor, pulled off one such moment by announcing that Labour would not raise the basic or top rate of tax if it regained power, and would stick to the Conservatives’ spending plans for two years.

His aim was to bury Labour’s image as a “tax and spend” party and to slay the ghost of a disastrous “shadow Budget” before the 1992 election, in which Labour had promised to raise taxes to fund higher pensions and child benefit.

New Labour’s 1997 pledge proved a crucial step on Tony Blair’s path to power. The late Philip Gould, Mr Blair’s pollster, recalled: “The Tories were pole-axed. It was as though a political mallet had been smashed through their heads.”

Voters’ remaining doubts about Labour eased and the party even moved ahead of the Tories on tax, always one of the strongest Conservative cards. Mr Blair was on course for his landslide victory four months later.

The irony was that Kenneth Clarke, Tory Chancellor at the time of the election, admitted later that his party would never have been able to stick to his “eye-wateringly tight” spending limits if it had retained power. Labour’s two-year squeeze was followed by a big splurge.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave long-running series
Arts and Entertainment
Game Of Thrones
Uh-oh, winter is coming. Ouch, my eyes! Ygritte’s a goner. Lysa’s a goner. Tywin’s a goner. Look, a dragon
tvSpoiler warning:The British actor says viewers have 'not seen the last' of his character
Sport
The Etihad Stadium, home of Manchester City
premier league

The Independent's live blog of today's Premier League action

News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
voices
Sport
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Sport
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
athletics
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

KS1 Primary Teacher

£100 - £150 per day: Randstad Education Leeds: Qualified KS1 Supply Teacher re...

KS2 Teaching Supply Wakefield

£140 - £160 per day: Randstad Education Leeds: Qualified KS2 Supply Teacher r...

Year 1/2 Teacher

£130 - £160 per day: Randstad Education Leeds: Qualified KS1 Teacher required,...

Primary Teachers Needed for Supply in Wakefield

£140 - £160 per annum: Randstad Education Leeds: Qualified KS1&2 Supply Te...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam