Party games: Labour has a tricky balance to strike

Labour needs plans that will tackle the vast deficit, yet still be different from its opponents’

Amid the hue and cry over Ed Miliband’s party-conference pledge to freeze energy bills, the Labour leadership managed to avoid all but the most cursory reference to the public deficit. Beyond the suggestion from Ed Balls that any manifesto spending plans might be given the once-over by the Office for Budget Responsibility (a move being resisted by the Chancellor), the focus was resolutely on Labour’s stronger suit: falling living standards.

Such reticence was not surprising, given the improvements in economic outlook. But the issue cannot be ignored for long. And for all that the recent insights into Mr Miliband’s approach are interesting, they are of little practical value until he fleshes out his plans for tax and spending. Therein lies his trickiest challenge; still outflanked by the Tories when it comes to public trust over the economy, Labour needs plans that will tackle the vast deficit, yet still be different from its opponents’. After all, if the choice is between two types of austerity, the danger for Mr Miliband is that voters plump for the real (Tory) thing.

A report from the Fabian Society today gives an inkling of the proposed solution. Where George Osborne wants a budget surplus and tax cuts after the election, the Labour think-tank is proposing a 1 per cent boost to spending – a move it says is “credible and consistent with deficit reduction”. There will still need to be cuts. The report suggests £5bn saved from social security, and also floats “modest” tax rises. But the priority would be extra spending on skills and infrastructure.

A think-tank – even a closely affiliated one – is not the party leadership. Nor will many decisions be made until nearer to the election. But the Fabian Society’s conclusions still look uncannily like an early manifesto draft, and high-level sources suggest that is just what they are. In the past week, shadow ministers have accepted free schools and toughened up on welfare – two areas where the party polls badly. But on the central issue of tax and spending, there are real efforts to differentiate.