Labour offers tax breaks to boost growth

Labour today offered tax breaks to homeowners and small businesses as part of a five-point plan to boost growth which shadow chancellor Ed Balls said could help Britain avoid a decade of economic stagnation.

His calls for a temporary cut to 5% in VAT on home improvements and a national insurance holiday for firms with fewer than 10 employees taking on new staff were welcomed by builders and small businesses.

But Tories accused Labour of being "addicted to debt", claiming the cost of Mr Balls' plan would add £20 billion to Government borrowing.

The shadow chancellor used his keynote speech to Labour's annual conference in Liverpool to try to rebuild the party's damaged credibility on the economy, promising to exercise "iron discipline" on spending.

To the dismay of some activists he said Labour could not promise to reverse coalition cuts and would use any windfall from the sale of part-nationalised banks to pay off debt, not boost spending.

Promising "fiscal responsibility in the national interest", he told delegates: "It will not be enough to expose that David Cameron and George Osborne have got the economy badly wrong.

"We will never have credibility unless we have the discipline and the strength to take tough decisions."

Transport union boss Bob Crow of the RMT - which is not affiliated to Labour - said Mr Balls showed "a bizarre set of priorities" in earmarking cash from bank shares for debt-reduction rather than schools and hospitals.

Len McCluskey, general secretary of Britain's biggest union Unite, questioned Mr Balls' approach, warning that "Labour ... cannot simply be the party that cuts a little less than the Tories. That will not win the next election."

Tories said Mr Balls had failed to come up with a credible plan to deal with the deficit.

Treasury minister Justine Greening said: "Announcing £20 billion new spending after claiming he would be tough on the deficit shows Ed Balls has zero credibility.

"He's ducked all the tough decisions and refused to apologise for Labour overspending. Labour is still dangerously addicted to debt."

Mr Balls's plan involves:

* Cutting VAT on home improvements, repairs and maintenance to 5% for one year;

* A 12-month employers' national insurance holiday for new workers taken on by small businesses;

* Temporarily reversing the VAT hike from 17.5% to 20% introduced in January;

* Bringing forward investment in "shovel-ready" infrastructure schemes, particularly cancelled school projects;

* A repeat of Alistair Darling's tax on bank bonuses, to raise £2 billion to fund house-building and jobs for young people.

"Five immediate steps the Government could take tomorrow - and if they do so, we will back them," said Mr Balls.

"Call it Plan A-plus. Call it Plan B. Call it Plan C. I don't care want they call it - Britain just needs a plan that works."

Labour aides said Tory estimates failed to take into account the additional tax revenues and savings on benefits from enhanced growth and employment which the plan would deliver.

They said slashing VAT on home improvements would cost between £100 million and £500 million, but would provide work for some of the trades worst hit by the recession and allow householders unable to sell their homes in sluggish market conditions to invest in them by renovating and building extensions.

The NI holiday would be covered by an existing £900 million scheme launched by Chancellor George Osborne last year to help 400,000 new businesses, which has so far been taken up by only 5,500 firms.

In recognition of continuing voter discontent with Labour's record under Gordon Brown, Mr Balls admitted that Labour made "mistakes" on bank regulation, immigration from eastern Europe, abolishing the 10p tax rate and failing to do enough to support training while in power.

But he rejected Conservative claims that excessive spending on public services was to blame for the financial crisis.

He accused the coalition Government of making "reckless, ideological, unfair" spending cuts which had cost jobs and left the economy flatlining.

Mr Osborne and Prime Minister David Cameron were guilty of a "failure of leadership (and) abdication of responsibility" for advocating austerity and cuts for countries facing economic crisis around the world, rather than pushing for a global plan to restore growth, he said.

With the world facing "the darkest, most dangerous times for the global economy in my lifetime", Britain was threatened with "a lost decade of economic stagnation" if growth is not revived.

Elsewhere at the conference, Labour leader Ed Miliband came under pressure from unions to support strikes planned for November 30.

Dave Prentis, general secretary of public sector union Unison, won a standing ovation when he issued a direct challenge to Mr Miliband to stand "shoulder to shoulder" with workers threatening to strike over pensions.

The union - and millions of workers - expected to be backed by Labour "and its leadership", he said.

PA