Ed Balls has rejected demands from allies of Ed Miliband that he admit Labour spent too much when they were in power.
In a fresh sign of tension in the Labour leadership, the shadow Chancellor has ruled out making an apology for what the Conservatives describe as Labour's "overspending" during the Blair-Brown years.
A transcript obtained by The Independent shows that Mr Balls told Labour MPs at a private meeting on Monday night: "Our message has most resonance not when we try and distance ourselves from the past or when we defend our record, because people are most concerned about what is happening now."
After studying opinion polls and Labour focus groups, Mr Balls is convinced that the two most powerful opposition messages are that the Coalition is cutting "too far, too fast" and risks creating a "vicious circle" because the cuts will push people out of jobs and stall economic growth.
Last night, aides of Mr Balls and Mr Miliband insisted that there is no split between them over the party's economic strategy. However, some allies of the Labour leader claim Mr Balls does not want to "say sorry" for the high levels of spending under the last government because he was a key architect of Gordon Brown's policy. "We need to admit we didn't get as much value for money from the public spending as we should have got so the voters will give us a hearing and we can move on," one Shadow Cabinet member said.
Mr Balls believes that an apology would play into the Tories' hands, boosting David Cameron's attempts to blame Labour for the deficit and allowing him to point to Labour's admission at the next general election.
At Monday's meeting of the Parliamentary Labour Party (PLP), Mr Balls surprised some MPs by not mentioning Mr Miliband's campaign to appeal to the "squeezed middle" and instead talking about the need to create jobs. Mr Balls' allies hit back, insisting that the shadow Chancellor's "here and now" argument about jobs complemented the Labour leader's more long-term strategy about living standards.
Mr Balls will develop his attack on the Government's strategy in a keynote speech at the London School of Economics tomorrow. It will be his response to the annual Mansion House speech tonight by George Osborne, the Chancellor.
The shadow Chancellor admits that Labour has a long way to go on the economy but believes the Opposition has shifted the argument from "there is no alternative" to "what is the alternative?"
According to the transcript, Mr Balls told the PLP: "Our line that you need jobs and growth to get the deficit down also resonates, as does the argument that the Tories are getting the economy into a vicious circle. People are worried when we tell them the Government is set to borrow £46bn more over the next few years because of slower growth, higher inflation, higher unemployment. But we need to do more to hammer home that message – and that's what shadow ministers will be doing over the coming months."
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