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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Why Clive Lewis was furious when a Trident pledge went missing from his speech

The shadow defence secretary is carving out his own line on security. 

Clive Lewis’s first conference speech as shadow defence secretary has been overshadowed by a row over a last-minute change to his speech, when a section saying that he “would not seek to change” Labour’s policy on renewing Trident submarines disappeared.

Lewis took the stage expecting to make the announcement and was only notified of the change via a post-it note, having reportedly signed it of with the leader’s office in advance. 

Lewis was, I’m told, “fucking furious”, and according to Kevin Schofield over at PoliticsHome, is said to have “punched a wall” in anger at the change. The finger of blame is being pointed at Jeremy Corbyn’s press chief, Seumas Milne.

What’s going on? The important political context is the finely-balanced struggle for power on Labour’s ruling national executive committee, which has tilted away from Corbyn after conference passed a resolution to give the leaders of the Welsh and Scottish parties the right to appoint a representative each to the body. (Corbyn, as leader, has the right to appoint three.)  

One of Corbyn’s more resolvable headaches on the NEC is the GMB, who are increasingly willing to challenge  the Labour leader, and who represent many of the people employed making the submarines themselves. An added source of tension in all this is that the GMB and Unite compete with one another for members in the nuclear industry, and that being seen to be the louder defender of their workers’ interests has proved a good recruiting agent for the GMB in recent years. 

Strike a deal with the GMB over Trident, and it could make passing wider changes to the party rulebook through party conference significantly easier. (Not least because the GMB also accounts for a large chunk of the trade union delegates on the conference floor.) 

So what happened? My understanding is that Milne was not freelancing but acting on clear instruction. Although Team Corbyn are well aware a nuclear deal could ease the path for the wider project, they also know that trying to get Corbyn to strike a pose he doesn’t agree with is a self-defeating task. 

“Jeremy’s biggest strength,” a senior ally of his told me, “is that you absolutely cannot get him to say something he doesn’t believe, and without that, he wouldn’t be leader. But it can make it harder for him to be the leader.”

Corbyn is also of the generation – as are John McDonnell and Diane Abbott – for whom going soft on Trident was symptomatic of Neil Kinnock’s rightward turn. Going easy on this issue was always going be nothing doing. 

There are three big winners in all this. The first, of course, are Corbyn’s internal opponents, who will continue to feel the benefits of the GMB’s support. The second is Iain McNicol, formerly of the GMB. While he enjoys the protection of the GMB, there simply isn’t a majority on the NEC to be found to get rid of him. Corbyn’s inner circle have been increasingly certain they cannot remove McNicol and will insead have to go around him, but this confirms it.

But the third big winner is Lewis. In his praise for NATO – dubbing it a “socialist” organisation, a reference to the fact the Attlee government were its co-creators – and in his rebuffed attempt to park the nuclear issue, he is making himeslf the natural home for those in Labour who agree with Corbyn on the economics but fear that on security issues he is dead on arrival with the electorate.  That position probably accounts for at least 40 per cent of the party membership and around 100 MPs. 

If tomorrow’s Labour party belongs to a figure who has remained in the trenches with Corbyn – which, in my view, is why Emily Thornberry remains worth a bet too – then Clive Lewis has done his chances after 2020 no small amount of good. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.