Ed Miliband will move to change the terms of the general election campaign by portraying Labour as the party of fiscal responsibility when he guarantees that every policy will be fully funded and will involve no extra borrowing.
In one of the boldest moves by a Labour leader since Tony Blair amended clause IV in 1994, Miliband will use the launch of the party’s manifesto to unveil a “budget responsibility lock” to guarantee the deficit will be cut in every year.
Speaking at the launch of the Labour general election manifesto in Manchester on Monday, Miliband will say: “The very start of our manifesto is different to previous elections. It does not do what most manifestos do. It isn’t a shopping list of spending policies.
“It does something different: its very first page sets out a vow to protect our nation’s finances; a clear commitment that every policy in this manifesto is paid for without a single penny of extra borrowing.”
The Labour leadership hopes that placing the elimination of the budget deficit at the centre of its manifesto will wrong-foot George Osborne, who had hoped to portray the party as fiscally irresponsible.
Labour believes that the chancellor, who failed on nearly 20 occasions on Sunday to explain how the Tories would fund a commitment to provide an extra £8bn a year to the NHS by 2020, is tripping up by making unfunded commitments. Labour also points out the Tories have failed to explain how they will deliver £12bn of welfare cuts, which account for nearly half of the planned £30bn fiscal consolidation in the next parliament.
Miliband will seek to exploit the Tory weaknesses when he publishes the Labour election manifesto, which will include on its first page a pledge to offer three key guarantees in a “budget responsibility lock”:
- Every policy outlined in the manifesto will be funded with no additional borrowing. All the major parties will in future have to submit their tax and spending commitments to the Office for Budget Responsibility for auditing – a request that has been rejected by Osborne.
- The first line of Labour’s first budget will declare that it “cuts the deficit every year”. Every subsequent budget will have to abide by this commitment which will be verified by the OBR.
- There will be “strong, fair fiscal rules” to ensure the national debt falls and a surplus is secured as soon as possible in the next parliament.
The Labour leader will make clear that, despite the fiscal constraints, he will be able to deliver major reforms. These include a £2.5bn NHS Time to Care fund, paid for by the mansion tax and a levy on tobacco firms; 25 hours of childcare for working parents of children aged three and four paid for by increasing the banking levy by £800m; and smaller class sizes for children aged five, six and seven paid for by ending the free schools programme.
Miliband will say: “The plan we lay before you is noless ambitious because we live in a time of scarcity. It is more ambitious because it starts from a clear commitment to balance the books, and more ambitious because it does not stop there.
“It meets the scale of the challenges we face today, with not one policy funded by extra borrowing. It is a better plan for a better future which shows the next government will be disciplined precisely because we want to make the difference.
“This is a manifesto which shows Labour is not only the party of change but the party of responsibility too.”
The Labour leader will be highly critical of the Tories as he moves to change the terms of the election campaign by saying they are now the fiscally responsible party. Miliband will say: “In recent days, you have seen the Conservatives throwing spending promises around with no idea of where the money is coming from, promises which are unfunded, unfair and unbelievable.
“That approach is bad for the nation’s books. And nothing is more dangerous to our NHS than saying you will protect it without being able to say where the money is coming from. You can’t help the NHS with an IOU. This is the road that leads only to broken promises and it is working people who will pay the price with higher taxes and public services undermined.”
The shadow cabinet will travel to Manchester for the launch of the manifesto in high spirits after a faltering week of campaigning by the Tories. David Cameron moved to address concerns the Tories are overly negative, after the defence secretary Michael Fallon launched a highly personal attack on Miliband by accusing him of stabbing his brother in the back during the 2010 leadership contest.
In a speech in Cheltenham, the prime minister sought to strike an upbeat note by describing plans to raise the inheritance tax threshold on family homes to £1m as part of the “Conservative dream”. But the Institute for Fiscal Studies warned the plan would disproportionately benefit richer people.
Cameron briefly changed his sunny tone to attack Labour for planning to resort to a traditional tax and spend approach. He said: “The Labour party … want to spend more, borrow more, waste more, spend more on welfare, pat themselves on the back more. And who’s going to pay more? You. In more taxes.”
The Labour leadership believes the Tory attacks are falling flat – and the party is running into trouble – because Miliband and shadow chancellor Ed Balls have been careful to bulletproof themselves against Osborne’s tactics on the public finances. Miliband made clear the deficit would be his first priority in a speech towards the end of last year, blunting Tory attacks that Labour is the party of deficit-deniers.
Balls and Miliband agreed Labour should vote for the coalition’s Charter for Budget Responsibility in January to avoid falling into an Osborne trap that they are not serious about tackling the deficit.
The Labour leadership believes Tory claims, that signing up to the charter means Labour has committed itself to a £30bn fiscal consolidation in the next parliament, are falling flat because the charter was more equivocal. It simply committed the parties to amending Osborne’s original June 2010 fiscal mandate to assess the deficit-reduction plans on a three-year rolling, forward-looking basis rather than over five years. This creates the sort of flexibility that allowed Osborne to miss his target of balancing the current budget in the last parliament.
Labour believes it has a more credible deficit-reduction plan that will allow for more flexibility while stabilising the public finances. It will guarantee to cut the deficit every year but will resist following the Tory and Lib Dem plan to eliminate the deficit by 2017-18. Labour will pledge to deliver a surplus in the current budget as soon as possible in the next parliament. This could allow the party to borrow to fund capital investment for infrastructure projects.
Manchester is the scene of Miliband’s greatest and most difficult moments. He was unveiled as Labour leader in the city in 2010 but forgot to mention the deficit in his speech to the party conference in Manchester last year.
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