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27th April 2013

Battle lines drawn as Labour stake economic plan on outspending the Conservatives

Ben Fearn explains why he believes Labour’s spending proposals will result in increased support for the party

Ed Miliband and the Labour Party are preparing a bold pledge to outspend the Conservatives at the next General Election in 2015. The strategy, in line with their “too far, too fast” mantra of Opposition, is a risky one as Labour faces the risk of another 1992-esque “tax bombshell”, where John Major’s Conservatives successfully capitalised on Shadow Chancellor John Smith’s plan to raise the top rate of tax to 50p.

There are risks to economic credibility and concerns in the Blairite wing of the party, with former Chancellor Alistair Darling stating “”I don’t think my Labour colleagues need to take a position until we see what the present government is proposing”, adding that the current state of economic affairs is “very uncertain and unpredictable”. However, the move could prove to be a popular one within Manchester. The Labour Party returns four out of 5 MPs for the city of Manchester, and with an unemployment rate of 8.6% in the North West region, Manchester economists have called for Government intervention.

As reported in ‘Mancunion Matters’, the Chief Economist at Greater Manchester Chamber of Commerce, Dr Brian Sloan, has said “ the level of unemployment in this region remains well above the national average. This is unacceptable, but does offer the capacity for growth in the future”, adding that the Government “could address unemployment and the needs of businesses in the North West by targeting any savings announced in the Budget at the region’s infrastructure needs”. The Labour Party had recently proposed a house-building programme, funded by a banker’s bonus tax, but has ruled out “massive spending increases” on the NHS, refusing to commit to the Coalition’s spending levels.

Labour Councillor Michael Lee Amesbury, a representative of the Fallowfield ward and a member of the National Policy Forum, has played down the reports of the spending pledge, describing them as “speculative”. Amesbury added “nothing is decided at this stage. This far from an election, it would be wrong to suggest that we’ll outspend the Tories. The priorities are about jobs and growth”. When questioned on the possibility of a house-building programme, Amesbury said “we need to look at an element of stimulus into the economy; the IMF have reaffirmed that the Government are cutting too far, too fast. House-building is a priority for the future Government, but we can only spend what the country can afford”.

Despite Labour’s latest policy initiative, John Leech, Liberal Democrat MP for Manchester Withington, has questioned Labour’s integrity on the matter, telling me “You can’t believe a word that Labour says on cuts, spending or tax. They promised ‘cuts worse than Thatcher’ in office, and now oppose everything proposed whilst still promising ‘tough choices’. Despite their U-turn, Labour’s fiasco over the 10p tax rate left more half a million low-paid workers worse off”. Attacking their record in office, Leech added that Labour “cut income tax for millionaires by raising their personal allowance every year until their final month in office… the poorest fifth of the population paid a greater proportion of their income in tax than the richest fifth”.

In response to Labour’s spending plans, David Cameron has accused Miliband of “turning left” and of promising “more spending. More borrowing. More debt. More of all those things that got us into this mess”. However, the Coalition has been under fire for its “omnishambles” Budget of 2012, with the decision to cut the top rate of tax from 50p to 45p still an unpopular one.  Despite this, Leech has insisted that “over the five years of this Parliament under the Coalition, a millionaire (earning £1m p/a) will pay £381,000 more tax on their income (income tax and NICs) than they did under the last five years of the Labour Government”.

If Labour’s initial policy proves to be popular closer to 2015, the country may yet endorse Ed Miliband’s ‘One Nation’ message, possibly justifying Miliband’s belief that the political centre is moving to the left. A 23rd April ‘poll of polls’ has placed the Labour Party on 39%, the Conservatives on 30% and the Liberal Democrats on 11%, giving a projected Labour majority of 96. If these figures remain stable, the Labour Party’s tax and spending proposals may yet gain support and credence.

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