Osborne's Spending Review is a test for Labour too - how will it respond?

Balls and Miliband will come under ever greater pressure to say whether Labour will match the coalition's post-election spending plans.

So fractious have the negotiations over the 2015-16 Spending Review been that, at various points, some ministers have urged George Osborne not to hold one at all. But Osborne, who has scheduled the review for 26 June, was never likely to take their advice. For the Chancellor, the event is critical to the Conservatives' strategy for the 2015 general election. By setting spending limits for the first year after the election in advance, he will establish "the baseline" and challenge Labour to match it. Should it fail to do so, punishment will be swift. In a rerun of the Conservatives' 1992 campaign, Osborne will accuse Labour of planning to hit Middle England with a "tax bombshell" to fund higher spending. 

Whether or not pledge to match the coalition's spending plans, as Labour did with the Tories' in 1997, is the biggest political decision Ed Miliband and Ed Balls will take before the general election. If they accept Osborne’s baseline, the left and the trade unions will accuse them of embracing "Tory cuts" (something that, in the words of one Labour MP, “would make the row over the public-sector pay freeze look like a tea party"). If they reject it, the Chancellor will accuse them of planning billions in additional borrowing or tax rises. 

Having abandoned hope of meeting their original deficit-reduction targets, the Tories believe another election fought over austerity could yet favour them. In 2015, their pitch will be, “Yes, it’s taking longer than we thought. But who do you trust to finish the job – the government, or the ones who got us into this mess?”

A pledge by Balls to match Osborne’s spending plans would be an efficient means of closing down this line of attack. For this reason, it is an option that the shadow chancellor’s team notably refuses to rule out. As chief economic adviser to Gordon Brown, Balls helped mastermind the original 1997 pledge and has already declared that his "starting point" is that Labour will "have to keep all these cuts", a step towards accepting Osborne’s baseline. When Harriet Harman told the Spectator last September that Labour would not match the Tories’ spending plans and abandon its “fundamental economic critique” of the coalition, she was forced to issue a retraction

A promise to stick to the Tories’ baseline would not entail supporting all of the cuts proposed by Osborne; rather, Labour will need to replace any cuts that it rejects with tax rises or cuts of equivalent value. While acknowledging that it cannot avoid austerity, Labour would vow to distribute the pain more fairly, ensuring that the richest bear a greater burden. The party will likely pledge to reintroduce the 50p top rate of income tax and adopt some version of a "mansion tax" (a proposal but not yet a manifesto commitment). 

Against this, however, is the fact that signing up to the Conservatives' plans, a trick straight out of the New Labour playbook, would run entirely counter to the post-Blairite spirit of Miliband's leadership. Embracing Tory levels of austerity would also deny the economy the stimulus it so desperately needs. For these reasons, senior MPs, most notably Peter Hain, and groups such as the Fabian Society have already urged Labour to reject this course of action. 

Whichever path Balls and Miliband choose, don't expect an answer this year - or next. As today's Guardian reports, the party is likely to wait until just a few months before the general election before announcing its decision (as Blair and Brown did in 1997). This is smart policy as well as smart politics. With the economy and the public finances so volatile (borrowing has been revised up by £245bn since 2010 and growth has been around 6 per cent lower than forecast), Labour can reasonably argue that it is in no position to make a decision more than two years out from the election. Balls and Miliband have learned from the mistakes of the Tories, who pledged to match Labour's spending plans in 2007 only to abandon this pledge after the crash in 2008.

The Conservatives would like nothing more than for attention to be diverted away from their economic failure and onto Labour's plans. It is an opportunity that Balls and Miliband will rightly deny them. But as political pressure (from right and left) grows on Labour to declare its intentions, the next few months will provide the greatest test of party discipline yet. 

Ed Miliband and Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Want to send a positive Brexit message to Europe? Back Arsene Wenger for England manager

Boris Johnson could make a gesture of goodwill. 

It is hard not to feel some sympathy for Sam Allardyce, who coveted the England job for so many years, before losing it after playing just a single match. Yet Allardyce has only himself to blame and the Football Association were right to move quickly to end his tenure.

There are many candidates for the job. The experience of Alan Pardew and the potential of Eddie Howe make them strong contenders. The FA's reported interest in Ralf Rangner sent most of us scurrying to Google to find out who the little known Leipzig manager is. But the standout contender is Arsenal's French boss Arsene Wenger, 

Would England fans accept a foreign manager? The experience of Sven Goran-Eriksson suggests so, especially when the results are good. Nobody complained about having a Swede in charge the night that England won 5-1 in Munich, though Sven's sides never won the glittering prizes, the Swede proving perhaps too rigidly English in his commitment to the 4-4-2 formation.

Fabio Capello's brief stint was less successful. He never seemed happy in the English game, preferring to give interviews in Italian. That perhaps contributed to his abrupt departure, falling out with his FA bosses after he seemed unable to understand why allegations of racial abuse by the England captain had to be taken seriously by the governing body.

Arsene Wenger could not be more different. Almost unknown when he arrived to "Arsene Who?" headlines two decades ago, he became as much part of North London folklore as all-time great Arsenal and Spurs bosses, Herbert Chapman or Bill Nicholson, his own Invicibles once dominating the premier league without losing a game all season. There has been more frustration since the move from Highbury to the Emirates, but Wenger's track record means he ranks among the greatest managers of the last hundred years - and he could surely do a job for England.

Arsene is a European Anglophile. While the media debate whether or not the FA Cup has lost its place in our hearts, Wenger has no doubt that its magic still matters, which may be why his Arsenal sides have kept on winning it so often. Wenger manages a multinational team but England's football traditions have certainly got under his skin. The Arsenal boss has changed his mind about emulating the continental innovation of a winter break. "I would cry if you changed that", he has said, citing his love of Boxing Day football as part of the popular tradition of English football.

Obviously, the FA must make this decision on football grounds. It is an important one to get right. Fifty years of hurt still haven't stopped us dreaming, but losing to Iceland this summer while watching Wales march to the semi-finals certainly tested any lingering optimism. Wenger was as gutted as anybody. "This is my second country. I was absolutely on my knees when we lost to Iceland. I couldn't believe it" he said.

The man to turn things around must clearly be chosen on merit. But I wonder if our new Foreign Secretary Boris Johnson - albeit more of a rugger man himself - might be tempted to quietly  suggest in the corridors of footballing power that the appointment could play an unlikely role in helping to get the mood music in place which would help to secure the best Brexit deal for Britain, and for Europe too.

Johnson does have one serious bit of unfinished business from the referendum campaign: to persuade his new boss Theresa May that the commitments made to European nationals in Britain must be honoured in full.  The government should speed up its response and put that guarantee in place. 

Nor should that commitment to 3m of our neighbours and friends be made grudgingly.

So Boris should also come out and back Arsene for the England job, as a very good symbolic way to show that we will continue to celebrate the Europeans here who contribute so much to our society.

British negotiators will be watching the twists and turns of the battle for the Elysee Palace, to see whether Alain Juppe, Nicolas Sarkozy end up as President. It is a reminder that other countries face domestic pressures over the negotiations to come too. So the political negotiations will be tough - but we should make sure our social and cultural relations with Europe remain warm.

More than half of Britons voted to leave the political structures of the European Union in June. Most voters on both sides of the referendum had little love of the Brussels institutions, or indeed any understanding of what they do.

But how can we ensure that our European neighbours and friends understand and hear that this was no rejection of them - and that so many of the ways that we engage with our fellow Europeans rom family ties to foreign holidays, the European contributions to making our society that bit better - the baguettes and cappuccinos, cultural links and sporting heroes remain as much loved as ever.

We will see that this weekend when nobody in the golf clubs will be asking who voted Remain and who voted Leave as we cheer on our European team - seven Brits playing in the twelve-strong side, alongside their Spanish, Belgian, German, Irish and Swedish team-mates.

And now another important opportunity to get that message across suddenly presents itself.

Wenger for England. What better post-Brexit commitment to a new Entente Cordiale could we possibly make?

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.