Ed Miliband speaks at Senate House on November 13, 2014 in London. Photograph: Getty Images.
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Miliband confronts Labour's deficit problem and opens new dividing line on the state

Labour leader attacks the Conservatives' plan for "a dramatic shrinking of the state and public services" to 1930s levels. 

Ed Miliband's speech at this year's Labour conference is best remembered for his failure to mention the deficit. His amnesia served to magnify a bigger problem: that the party hasn't come close to regaining the economic credibility it lost during the crash.

Despite George Osborne's multiple failures (the deficit is forecast to be £91bn this year, £54bn higher than promised in 2010) the Tories' lead as the best custodians of the public finances has grown, rather than shrunk. Shadow cabinet ministers fear that Labour's inability to win back economic trust is obscuring Miliband's promise of a better tomorrow. As long as voters doubt the party's competence, they won't believe in its ability to raise stagnant living standards. While Labour has bound itself to fiscal rectitude by pledging to eliminate the current account deficit by the end of the next parliament and to reduce the national debt as share of GDP, many have long believed that this message will only gain credence when it is delivered prominently by the leader. 

Miliband's address tomorrow morning in London is aimed at answering these criticisms. Having failed to mention the deficit once in Manchester, he is now devoting a whole speech to the subject - the first time he has done so. He will say: "My speech today is about the deficit. Its place in our priorities, how a Labour government would deal with it, and how we would do so consistent with our values." Miliband will go on to declare that those who think "the deficit simply doesn’t matter to our mission and should not be our concern" are "wrong". He will warn that "unless there is a strategy for dealing with the deficit, it is working people who will end up paying the price of the economic instability that is created. It is also necessary for funding our public services because higher debt interest payments squeeze out money for those services and for investment in the long-term potential of our country. 

"There is no path to growth and prosperity for working people which does not tackle the deficit. What we need is a balanced approach which deals with the deficit - but does so sensibly."

His aim is to convince voters that Labour wll reduce the deficit but will do so in a different and better way than the Tories. Rather than relying on cuts alone, the party will also impose new tax rises on the wealthy and will stimulate growth and wages in order to raise flagging Treasury receipts. The party cites the slump in tax revenues owing to inadequate pay as a vindication of its economic analysis. A Labour strategist told me that reducing the deficit and solving the "cost-of-living crisis" were "not separate projects, but the same project".

The speech will be welcomed by the party's deficit hawks although some will question why such an intervention wasn't made earlier in the parliamentary cycle. Others on the left are likely to complain that by devoting an entire speech to the issue, Miliband is reinforcing George Osborne's frame of choice. 

To underline Labour's commitment to fiscal responsibility, Ed Balls has written to all shadow cabinet ministers warning those responsible for unprotected areas (everything excluding the NHS and international development) that "you should be planning on the basis that your departmental budgets will be cut not only in 2015/16, but each year until we have achieved our promise to balance the books": his grimmest statement yet of the lean times ahead for Whitehall. Balls promises, however, that "We will set out for our manifesto other priority areas of spending which will be protected" (schools are one likely candidate). 

Alive to the danger of appearing to embrace Conservative-style austerity, as Labour sheds left-wing voters to the Greens and the SNP, Miliband will also carve a new dividing line with Osborne. Following the OBR's forecast that public spending will fall to just 35.2 per cent of GDP by 2019-20, the lowest level since the 1930s, he will rule out ever making cuts of this scale. 

In an ironic allusion to his alleged minimalist electoral strategy, he will declare: "There is only one 35 per cent strategy in British politics today: the Tory plan for cutting back the state and spending on services to little more than a third of national income." The Tories' plan to continue cutting even once the deficit has been eliminated has given Labour the opening it needs to accuse them of an ideological drive to shrink the state. One strategist told me that the Conservatives were now in "a dangerous place". 

Miliband will say: "They have finally been exposed by the Autumn Statement for what they really are: not modern compassionate Conservatives at all - but extreme and ideological, committed to a dramatic shrinking of the state and public services, no matter what the consequences."

"They are doing it, not because they have to do it, but because they want to. That is not our programme, that will never be our programme, and I do not believe it is the programme the British people want.

"This is a recipe for public services that will disintegrate and for a permanent cost of living crisis because we won’t be investing in the skills and education people need for good quality jobs, and indeed for sufficient tax revenues. And we know what the result will be: the Tories might be able to deliver the cuts they have promised, but they won’t be able to cut the deficit as they promised."

Miliband will outline the "five principles" that will guide Labour's alternative approach to the deficit: "These are the principles of deficit reduction a Labour government will follow: balancing the current budget, not destroying productive investment; an economic strategy to bring the deficit down, not drive it up; sensible reductions in spending, not slash and burn of our public services; the wealthiest bearing the biggest burden, not everyday people; and fully funded commitments, without additional borrowing, not unfunded tax cuts that put our NHS at risk."

The Tories have long sought to create a narrative of risk around a future Labour government by warning that the opposition would "crash the car again". By warning of the consequences for public services of another Conservative-led government, Miliband aims to construct a centre-left equivalent. The defining passage of his speech tomorrow is his declaration that "We will deal with the deficit but we will never return to the 1930s. We won’t take risks with our public finances. And we won’t take risks either with our public services, our National Health Service." 

The Conservatives' aggressive response to the BBC's coverage of the Autumn Statement revealed the extent to which they fear that the cuts to come could jeopardise their election chances. Osborne and other senior Tories partly blame their failure to win a majority on his "age of austerity" conference speech in 2009, which triggered a poll slump from which they never recovered. Labour was able to win back support as it warned of cuts to tax credits, reductions in child benefit, Sure Start closures and a rise in VAT (all denied by the Tories during the campaign only to be introduced immediately afterwards). By warning of the threat now posed to the NHS and to schools by a return to levels of public spending that existed before the creation of the welfare state in 1945, Miliband is attempting to do the same. It is a powerful frame that he is likely to return to repeatedly before the election (although some will attack it as a repeat of the "good cuts vs. bad cuts" strategy that Gordon Brown felt trapped by in 2010). 

A Labour aide promised that there would be new announcements in the speech tomorrow. Whether they are on protecting public services or on cutting deficit will reveal much about the message that Miliband wants to take priority. 

George Eaton is political editor of the New Statesman.

Photo: Getty
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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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