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21 September 2014

Balls looks to win back trust with pledge to cut ministers’ pay

Shadow chancellor announces that ministerial salaries will cut by five per cent under Labour and then frozen. 

By George Eaton

Ed Balls has long signalled that his priority is to convince voters that Labour can be trusted to manage the public finances, an issue on which it continues to badly trail the Tories. Unless the public believe the party is committed to fiscal responsibility, he fears that its promise of radical economic change will fall on deaf ears.

For this reason, rather than any new spending commitments, his speech to Labour conference tomorrow will feature two proposed cuts (to match those he inflicted on the football field yesterday). First, Balls will announce that ministers’ pay (£134,565 for cabinet members) would be cut by five per cent under Labour and then frozen each year until the current deficit has been cleared. This extends the stance adopted by the coalition, which cut ministerial pay by five per cent in its first year and froze it thereafter. 

Balls will say:

The next Labour government will get the deficit down. And Ed Miliband and all my shadow cabinet colleagues are clear it will mean cuts and tough decisions and we will take the lead.

So I can announce today that if we win the election, on day one of the next Labour government the pay of every government minister will immediately be cut by five per cent.

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Ministerial pay will then be frozen each year until we have achieved our promise to balance the nation’s books.

Because we are all clear that everybody in the next Labour government will be fully focused on that vital task of getting the deficit down.

It’s a smart piece of political symbolism, drawing on the idea, originally championed by David Cameron, that “we’re all in this together”. In common with other Labour proposals, such as banning MPs from holding lucrative second jobs, it is designed to show that the political class recognises the need for shared sacrifice. 

The second new announcement from Balls is that increases in child benefit will be capped at 1 per cent (as they have been under the coalition) for the first two years of the next parliament. This will save £400m and he will pledge that the money will go towards reducing the deficit (which stood at £106bn last year).  

Balls will say:

We will have to make other decisions which I know will not be popular with everyone.

At a time when the public services that pensioners rely on are under such pressure, we will stop paying the winter fuel allowance to the richest five per cent of pensioners.

I want to see child benefit rising again in line with inflation in the next parliament, but we will not spend money we cannot afford. So for the first two years of the next parliament, we will cap the rise in child benefit at one per cent. It will save £400 million in the next Parliament. And all the savings will go towards reducing the deficit.

But unlike the Tories we will always ask those who have the most to make the biggest contribution. 

That is why, with the deficit still high and working people already paying more, we opposed David Cameron cutting the 50p top rate of tax. 

Now cannot be the right time to give the richest one per cent of people in the country a £3 billion tax cut. So as we get the deficit down in the next parliament, the next Labour government will reverse this Tory tax cut for millionaires. Because Labour will balance the books in a fairer way.

In response, the Tories have noted that the proposed cuts to ministerial pay amount to just 0.003 per cent of the deficit: “These savings on ministerial pay only cut a miniscule fraction of the deficit – less than 1 per cent of 1 per cent. And it comes just days after the IFS said Labour’s economic policy means £28bn extra borrowing.

“For all his bluster, Ed Balls still refuses to admit that Labour spent too much and he’s opposed every decision we’ve taken to cut the deficit. All a Labour government would offer is more inefficient spending, more taxes and more debt than our children could ever hope to repay.”

But as Cameron  himself recognised before 2010, while the fiscal gains from cutting ministerial pay are meagre, the political gains are far greater. For Labour, however, having pledged to eliminate the current deficit by the end of the next parliament, and to reduce the national debt as a share of GDP, the question remains where else the axe will fall. 

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