Bloomberg News

U.K.’s Labour Seeks to Emulate Cameron Plans to Aid Credibility

January 16, 2012

Jan. 16 (Bloomberg) -- The U.K.’s opposition Labour Party sought to emulate Prime Minister David Cameron’s plans for lower spending and higher taxes after 2015 in an effort to rebuild its credibility on the economy.

Even as he argued ruling lawmakers are cutting the budget deficit “too far and too fast,” opposition leader Ed Milband said yesterday the next government will likely need to tackle record borrowing after the 2015 election and so couldn’t now promise to reverse tax increases and spending cuts.

“The prospects for what we will inherit if we win the election in 2015 look pretty grim, frankly, and we are showing that we understand those circumstances,” Miliband said on the British Broadcasting Corp.’s “Andrew Marr Show.”

Miliband and his Treasury spokesman Ed Balls are seeking to bolster Labour’s economic reputation with voters. They also aim to fend off criticism from Cameron and Chancellor of the Exchequer George Osborne that Labour’s lax spending during 13 years in power caused the national debt to more than double after 2007.

“However difficult this is for me, for some of my colleagues and for our wider supporters, we cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts,” Balls told the Fabian Society, a research group close to the party, on Jan. 14.

RBS, Lloyds

Money raised from selling the government’s stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc would be used to pay down debt should Labour regain power in 2015, he said.

“In our manifesto, we will commit to do the responsible thing and use any windfall gain from the sale of the government’s stakes in RBS and Lloyds to repay the national debt, not for a giveaway,” Balls said.

A YouGov opinion poll in yesterday’s Sunday Times found 69 percent of respondents said Miliband is doing badly, while 49 percent of Labour supporters said the same. His party was backed by 40 percent of those surveyed, compared to 38 percent support for Cameron’s Conservatives, who are governing in a coalition with the Liberal Democrats.

Miliband “doomed the Labour Party to electoral defeat by lining up with the Tory-led coalition’s cuts and their attacks on public-sector workers,” Bob Crow, general secretary of the Rail, Maritime and Transport Workers union, said yesterday.

AAA Rating

Miliband maintained his attack on the government’s economic record, saying unnecessarily harsh austerity had hurt the economy and public finances. He noted that Standard & Poor’s said last week European nations risk focusing too much on austerity as a route to smaller budgets, rather than trying to foster expansion. The U.K. is still rated AAA by S&P.

“If you raise taxes too fast and you cut spending too fast, what happens is you get low growth and it’s harder to pay off your debt,” Miliband said. “So the government should change course.”

Osborne said in November Britain faces two extra years of austerity. He used his end-of-year economic statement to Parliament to announce 23 billion pounds ($35 billion) of additional spending cuts after the Office for Budget Responsibility slashed its forecasts for economic growth.

The fiscal watchdog predicted Osborne will need to borrow an extra 112 billion pounds by 2016 and said more than 700,000 public-sector workers will lose their jobs over the next six years.

--Editors: Dan Weeks, Andrew Rummer.

To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net; Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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