Balls reaffirms Labour's commitment to cuts in 2015

Labour states unambiguously that it will be "cutting departmental spending in 2015-16" and will not borrow for "day-to-day spending".

While Labour's "cost-of-living" offensive has allowed it to reframe the economic debate in its favour, senior figures in the party know that it will struggle to win a majority unless it can convince voters that it can be trusted to spend money wisely. As Ed Balls says in his interview in today's FT, "Unless we can show . . . that we’ve got a plan which will work, the public won’t think that we will solve the cost of living crisis". 

To prove that Labour does have such a plan, Balls has launched the first phase of his "zero-based" spending review today. A zero-based review differs from others by requiring every item of spending to be approved, rather than merely changes to a pre-determined baseline. In other words, nothing is off the table. Labour plans to scrutinise spending in every area, including those protected by the coalition: the NHS, schools and international development. The document contains the most explicit statement yet that the party will cut departmental spending in 2015-16 and will not borrow to meet day-to-day spending:

We will be cutting departmental spending in 2015-16 and not raising it, with no more borrowing to cover day-to-day spending
The deficit forecasts might be slightly less dreadful than before (the OBR now expects the deficit to be £79bn in 2015-16 compared to £96bn in March; its 2010 forecast was £20bn), but the OBR's judgement that the improvement in the public finances is almost entirely cyclical means that the structural deficit (the part of the deficit that exists regardless of the level of economic output) is deemed to be no smaller than before; austerity cannot be avoided. 
 
But while Labour is committed to matching Osborne's departmental spending plans, there are many different ways to spend £313bn (the spending limit set by the coalition for 2015-16). While remaining within the Chancellor's fiscal envelope, Labour plans to identify "savings" and "switches" that better reflect its "priorities" (what Nye Bevan called "the religion of socialism"). As Balls suggested in his speech in June, this could include withdrawing funding for free schools in areas with surplus places, scrapping Police and Crime Commissioners, cutting the number of army officers and admirals, merging the four separate government motorist agencies, combining management functions in government departments, agencies, fire services and police forces, and requiring industries to contribute more to the cost of regulation. The party is also likely to vary the ratio of spending cuts to tax rises within Osborne's deficit reduction programme, for instance by reintroducing the 50p tax rate. 
 
These switch-spends and tax decisions will be included in Labour's manifesto, with a full Spending Review to follow after the election. It is also in the manifesto that the party will announce which areas, if any, it intends to ring-fence. This will almost certainly include the NHS. Polls show that it is the most popular spending area with voters and the above-average rate of inflation in the health service means it frequently requires real-terms rises just to stand still. With the Tories making it clear that they would continue to ring-fence the NHS after 2015, Labour has no intention of handing them an easy political victory. 
 
Here's the timetable for the zero-based review:
Phase 1 of the Zero-Based Review will involve the Shadow Chief Secretary and the Treasury team working with individual departments on a detailed response to the questions raised in this initial document. 
 
Phase 2 of the work will then identify initial savings and switches to reflect Labour's priorities and report before our manifesto. 
 
Phase 3 covering our first year in Government, will see the implementation of any immediate switches/changes to inherited plans and work on a full spending review for 2016-17 onwards. 
Two other points are worth noting. The first is that Balls has left himself room to borrow more than Osborne to fund investment in infrastructure, telling the FT that "any decision about capital" will depend on "the state of the economy". While polls show that voters are supportive of borrowing for areas such as housing, Labour will need to make the argument early enough to counter the inevitable charge from the Tories that it is planning more of the borrowing that "got us into this mess". 
 
The second is that the big fiscal question is not whether Labour will match the coalition's spending limits in 2015-16 (most governments deviate little from the plans they inherit) but whether it will remain within Osborne's envelope for the entire parliament. But for both political and economic reasons, don't expect an answer to that until after 2015. 
Ed Balls speaks at the CBI's annual conference on November 4, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo:Getty
Show Hide image

There's something missing from our counter-terrorism debate

The policy reckoning that occured after the 2005 terrorist attacks did not happen after the one in 2016. 

“Once the rockets are up, who cares where they come down? That's not my department, says Wernher von Braun.” That satirical lyric about Nazi rocket scientists has come to mind more than few times watching various tech giants give testimony in front of the Home Affairs Select Committee, one of the underreported sub-plots of life at Westminster.

During their ongoing inquiry into hate crime in the United Kingdom, committee chair Yvette Cooper has found a staggering amount of hate speech being circulated freely on the largest and most profitable social media platform. Seperately, an ongoing investigation by the Times has uncovered how advertising revenue from Google and YouTube makes its way straight into the coffers of extremist groups, ranging from Islamist extremists to white supremacists and anti-Semites.

One of the many remarkable aspects of the inquiry has been the von Braunesque reaction by the movers and shakers at these tech companies. Once the ad revenue is handed out, who cares what it pays for? That’s not my department is the overwhelming message of much of the testimony.

The problem gains an added urgency now that the perpetrator of the Westminster attacks has been named as Khalid Masood, a British-born 52-year-old with a string of petty convictions across two decades from 1982 to 2002. He is of the same generation and profile as Thomas Mair, the white supremacist behind the last act of domestic terrorism on British shores, though Mair’s online radicalisation occurred on far-right websites, while Masood instead mimicked the methods of Isis attacks on the continent.  Despite that, both fitted many of the classic profiles of a “lone wolf” attack, although my colleague Amelia explains well why that term is increasingly outmoded.

One thing that some civil servants have observed is that it is relatively easy to get MPs to understand anti-terror measures based around either a form of electronic communication they use themselves – like text messaging or email, for instance – or a physical place which they might have in their own constituencies. But legislation has been sluggish in getting to grips with radicalisation online and slow at cutting off funding sources.

As I’ve written before, though there  are important differences between these two ideologies, the radicalisation journey is similar and tends to have the same staging posts: petty criminality, a drift from the fringes of respectable Internet sub-cultures to extremist websites, and finally violence.  We don’t yet know how closely Masood’s journey follows that pattern – but what is clear is that the policy rethink about British counter-terror after the July bombings in 2005 has yet to have an equivalent echo online. The success of that approach is shown in that these attacks are largely thwarted in the United Kingdom. But what needs to happen is a realisation that what happens when the rockets come down is very much the department of the world’s communication companies. 

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