Ed Balls has denied there are splits over strategy at the heart of Labour after its policy chief, Jon Cruddas, said there was a "dead hand" at the centre of the party blocking reforms, and described its flagship benefits policy for under-21s as "cynical and punitive".
The shadow chancellor said he understood some of Cruddas's frustrations but overall the party was united and would publish more major ideas over the next few months.
Ed Miliband set out one of the party's radical new plans on Sunday, as he promised to hand £30bn of Whitehall spending to local councils in a significant devolution of power away from the central government. He also said he wanted a quarter of government contracts to go to small suppliers.
However, this was overshadowed by the controversy over Cruddas's remarks to the Compass thinktank, which were taped and handed to the Sunday Times.
According to the newspaper, Cruddas complained that plans drawn up by Labour's policy working groups had been "parked" and replaced with "cynical nuggets of policy to chime with our focus groups and press strategy".
The senior Labour MP has been working for more than a year on the party's major policy review, but he raised concerns that "interesting ideas" were not going to emerge through that process. He blamed a "profoundly dead hand" at the centre of the party for blocking the most radical proposals. In particular he expressed disappointment that the party was handed the Institute for Public Policy Research (IPPR) thinktank's two-year Condition of Britain report and chose to emphasise that it would adopt a policy of reforming benefits for 18- to 21-year-olds.
"Over at the IPPR they produced this report covering the whole gamut of social policy right from early-years interventions through to adult social care," he said. "[It is a] really interesting report; they have taken nearly two years of work … We managed in the political world to condense it into one story about a punitive hit on 18- to 21-year-olds around their benefits.
"That takes some doing, you know, a report with depth is collapsed into one instrumentalised policy thing which was fairly cynical and punitive."
Speaking on the BBC's Andrew Marr Show, Balls said the party's policy chief was excited by big ideas but may have been frustrated about the way they ended up being presented to the public.
"He is part of the Labour centre and we are all working together on these big reforms … I talked to Jon a couple of days ago; he's not frustrated, he's excited about his policy agenda. He's frustrated [about] the way in which one report of 250 pages gets reduced down … It's the world we live in and that's how it goes.
"But I think we have got big ideas – big devolution, we have got reports this week on long-term infrastructure spending, a new manufacturing industrial policy, new investment in skills – big changes which, let's be honest, aren't really on George Osborne's agenda."
Balls said Cruddas's policy review would come to be seen as a "big deal" once it had been published.
"We're going to come up with big ideas and just to answer that question, I understand Jon Cruddas's frustration about a newspaper headline," he said. "We've all been in a situation where a big report or a big speech is reduced down to just one policy. Jon Cruddas, with me and Ed and others, has been working for months, years on big reforms. They are going to come out in the next few months."
The shadow chancellor also hinted that Labour would come up with a major policy on ownership of the railways, though he stressed he was not arguing for renationalisation.
"We want a more strategic approach to the railways, definitely, and the fact that Network Rail has now come back on to the government balance sheet provides an opportunity for that. The franchising process over the last years has delivered more passenger numbers; there's been big public investment as well. But actually on the east coast a public operator has been doing a really good job so we're going to look at what we can do.
"What we want to say is, without ideology – we're not going to say this is about nationalisation or privatisation. Let's make sure the franchising process in the future gets the best deal for the taxpayer and the best deal for passengers and on fares."
Neal Lawson, chairman of Compass, fiercely criticised the secret recording of the semi-private event by an unknown party, saying political culture might be fatally diminished if MPs could not speak their minds among those on their own side.
He said it was not in the public interest to have politicians "systematically tracked down, and their every word secretly recorded and then used in evidence against them and their party".
Writing for the Guardian, he said: "Are there no spaces in which our politicians can test, discuss and get feedback on ideas with their friends and supporters? Are there no places where an audience can ask a question and hope to get a vaguely honest answer? Is nothing private? I've got images of Minority Report running through my mind and the notion of pre-crime. If the politicians think it, should we know it? Shall we bug their minds?"
He added: "Of course if there is wrongdoing, illegality or rank hypocrisy, then such subterfuge may well be justifiable. But this was an event for the members of a political organisation to think about the year ahead, discuss issues and vote accordingly. It should not have been violated."
He also accused Rupert Murdoch's "empire" – which owns the Sunday Times – of trying to destroy Labour and the possibility of "any alternative to the individualistic me-first politics of the past 30 years".
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