Tories go on the attack after Balls says Labour's welfare cap would include pensions

The shadow chancellor's latest display of fiscal responsibility is a major political gamble.

When Ed Miliband announced that Labour would introduce a cap on structural welfare spending, the assumption was that it would not include spending on pensioners. But on The Sunday Politics, Ed Balls revealed that the cap would include this area. He said: "George Osborne is going to announce his cap in two weeks' time. I don't know whether he will include pensioner spending or exclude it. At the moment our plan is to include it."

This is sensible policy; pensioners currently account for 42 per cent (£85bn) of all welfare spending, a total that will rise significantly as the population ages and as the economy recovers (reducing cyclical benefit spending). If Balls and Miliband are serious about reducing the social security bill, they cannot afford to exclude them from the cap.

But the politics are difficult for Labour. The Tories, who have previously signalled that the state pension will not be included in George Osborne's cap on annually managed expenditure, will now challenge Balls and Miliband to say how they would reduce spending on the elderly. Would they abandon the coalition's commitment to "triple lock" the state pension, so that it rises by the rate of inflation, average earnings or 2.5 per cent (whichever is highest)? The Tory Treasury Twitter account has already gone on the attack.

On the programme, Balls refused to rule out cutting spending on pensioners in order to avoid breaching the cap but also said that, while means-testing the winter fuel allowance (which would save just £100m), Labour would protect other universal benefits such as free bus passes, free prescriptions and free TV licences (the administrative costs of means-testing the latter would outweigh the savings, Balls suggested). But unless Labour is willing to make reductions elsewhere, the Tories will dismiss the cap as meaningless, while highlighting the £21bn of cuts they have announced to working age benefits.

Since the over-65s are more likely to vote than any other age group (76 per cent did in 2010 compared to 65 per cent of the total population), the Tories clearly believe that there are few votes to be won in running on a platform of lower spending on the elderly. But expect Cameron to now come under pressure from fiscal conservatives to match Labour's direction of travel on pensioner benefits.

Update: Unsurprisingly, Labour has quickly rebutted the Tory line that it "would cut pensions", but has said it would be "peverse" to exclude spending on pensioners from the cap. At present, however, it can only point to increases in the retirement age and means-testing the winter fuel allowance as examples of how it would restrain spending. A source told me:

Labour supports the triple lock on the state pension. But as Ed Balls said, it would be perverse to exclude overall spending on pensioners and the impact of an ageing society from any sensible and long-term fiscal plan to monitor and control structural social security spending. That's why we have supported increases in the retirement age as people live longer and why we have also said we would not pay the winter allowance to the richest 5 per cent of pensioners. We will look at the details of the government's cap when it is announced in the spending review as we develop the details of our own.

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

George Eaton is political editor of the New Statesman.

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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.