Britain will be on the “path to ruin” if Labour takes charge of the public finances, David Cameron will say on Monday as he warns parents and grandparents of the dangers to future generations if the country fails to deal with its debts.
As Miliband accused the Tories of adopting “gimmick” tactics on the public finances by staging a Commons vote on their plans on Tuesday, the prime minister will accuse Labour of threatening higher interest rates after failing to set a date for the elimination of the deficit.
In a speech to party supporters, Cameron will say: “The choice is clear: staying on the road to recovery – or choosing the path to ruin.
“If we fail to meet this national challenge, the writing is on the wall. More borrowing, and all the extra debt interest that brings, meaning there is less money to spend on schools and hospitals and all the things we value as a country. More spending, and the higher taxes that will require – hardworking people thumped to pay for government wastefulness. And higher interest rates too – punishing homeowners, hurting businesses, losing jobs. In short, economic chaos.”
Cameron will outline the first of six themes in the Tories’ general election manifesto – the deficit, jobs, taxes, education, housing and retirement. He is following in the footsteps of Miliband, who last month named the deficit as the first of a series of themes in Labour’s manifesto.
The Tories want to depict Labour’s plan as irresponsible because it differs in two respects from its own. Labour has pledged to ensure that the deficit is cut in every year of the next parliament but has declined to set a date by which the structural deficit must be eliminated for fear of sucking demand out of the economy. The Tories say they will achieve this by 2018.
Labour is pledging to balance the current budget, covering day-to-day government spending, but says it would continue to borrow to fund capital investment in infrastructure projects. The Tories say they will balance the overall budget by 2018 to allow them to build up a surplus of £23bn by 2020.
Miliband accused George Osborne of “gimmick” tactics after the chancellor announced plans to hold a Commons vote on Tuesday on the Tories’ deficit reduction plans. The Labour leader said he would support the government as the party seeks to avoid accusations that it is failing to acknowledge the significance of the deficit.
Labour believes it can laugh off the vote because it is a government measure which means the wording is likely to be limited to the agreed coalition position.
This covers two broad areas: spending plans for 2015-16, which have already been endorsed by Labour, and broad plans to eliminate the structural budget deficit by 2018. But the Lib Dems agreed with Labour that the fiscal consolidation should be achieved both by spending cuts and tax increases. The Tories believe it should only be achieved by spending reductions.
The chancellor suggested to the Sunday Times that he will outline plans ahead of the election to ensure that inheritance tax is only “paid by the rich”. He said: “I have taken steps to help with inheritance, making sure that people can pass on their pension to their children. People can pass on their Isas. David Cameron has made it clear, as have I, that we believe inheritance tax is a tax that should be paid by the rich and we will set out our further approach closer to the election.”
Osborne scared Gordon Brown into abandoning plans to call an early general election in the autumn of 2007 by outlining plans to raise the inheritance tax threshold to £1m for an individual or £2m for couples.
The Lib Dems forced Osborne to abandon the pledge in the 2010 coalition agreement – much to the relief of the chancellor, who regarded the proposal as an expensive luxury when the budget deficit was then running at over 10% of the UK’s GDP. The Sunday Times suggested that ministers would like to raise the inheritance tax rate from £325,000 to £2m.
The chancellor also confirmed that the Tories have no plans to raise VAT after the election as he answered Labour claims that he has secret plans to do so. He said: “I couldn’t have been clearer that our plans do not involve tax increases, including VAT, because our plans involve cutting public expenditure and saving on welfare budgets.”
Miliband used an appearance on the Andrew Marr Show on BBC1 to announce that Labour will hold a Commons vote this week to allow the energy regulator the power to cut retail prices when the wholesale reductions are not passed to consumers. His proposal, which builds on his pledge to freeze the price of fuel bills until 2017, is designed to show that Labour is combining a tough approach to the deficit with measures to tackle the cost of living crisis.
He said: “We are going to bring before the House of Commons a vote in parliament to say the government should bring forward fast-track legislation to ensure that we give the regulator that power. We’ve seen wholesale costs go down 20% in gas prices over the last year and no reductions in bills. We would give the regulator the power to cut prices, to give consumers immediate relief.”
Osborne tweeted last week that the government would put pressure on energy companies to pass on the cut in wholesale prices. The Tories indicated that they would not support the Labour plans as they challenged Miliband to explain whether consumers would not benefit from the current fall in wholesale energy prices if his price freeze had been in place.
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