September 22, 2014 / 2:03 PM / 3 years ago

Eyeing 2015 vote, Britain's Labour says it can be trusted to revive the economy

MANCHESTER England (Reuters) - Britain’s opposition Labour party promised on Monday to keep a firm grip on spending if it wins next year’s election, seeking to persuade voters with tough budget talk that the recovering economy will be safe in its hands.

Britain's shadow chancellor Ed Balls speaks at the Labour party's annual conference in Manchester, northern England September 22, 2014. REUTERS/Suzanne Plunkett

It was an early broadside in a campaign shaken up by disputes over powers for the United Kingdom’s regions following Scotland’s No” to independence vote.

Labour is narrowly ahead of Prime Minister David Cameron’s right-leaning Conservatives in opinion polls but lags far behind in terms of who voters trust most to run the economy.

Ed Balls, Labour’s finance minister-in-waiting, said a Labour government would limit rises in child benefit payments, warning party members at the same time that it was a taste of more tough spending pledges to come.

“We have learned from our past and our mistakes,” Balls told Labour’s last party conference before the election in May. “We are tough enough to make the difficult decisions.”

The party has irked some business leaders by promising to raise Britain’s minimum wage to help ease what it dubs a cost-of-living crisis, but it knows it must do more to counter its image as a tax-and-spend party.

Promising measures designed to prove it is fiscally responsible is fraught with risk since doing so also means curbing spending on core social policies, something that could alienate traditional supporters.

The economy is expected to be the key battle ground for the 2015 election, but political disagreements over how to grant Scotland and the rest of Britain greater devolution have also risen to the fore after Scots rejected independence in part because they were offered new powers anyway.

Cameron’s Conservatives are trying to cast themselves as the lone champions of the rights of the English, the majority nation in the United Kingdom, while Labour say they want to set up a constitutional convention after the next election to discuss UK-wide devolution.

TOUGH BUDGETS

Balls reiterated Labour’s pledge to get the current budget - which excludes spending on investment - into surplus during the 2015-2020 parliament and to have the national debt falling as soon as possible by sticking to a fiscal plan that goes almost as far as that of the Conservatives.

“We will not make promises we cannot meet and that we cannot afford,” he told hundreds of party members in Manchester, northern England.

The Conservative government likes to remind voters how Balls was part of the Labour government which was in charge when the 2008 financial crisis struck.

Compounding the problem for Balls, Britain’s economy has staged a much stronger-than-expected recovery since mid-2013.

In an attempt to prove Labour’s credentials to keep on bringing down Britain’s still large budget deficit, Balls said he would cap rises in child welfare payments at 1 percent for the first two years of the next parliament.

That pledge represented an extension of the current government’s plans and is likely to prove unpopular with Labour’s left wing.

Len McCluskey, the leader of Britain’s biggest trade union, said working people had “had enough talk of economic credibility which means credibility with the bond markets but not with the unemployed”.

The party has previously said it would take other measures to curb welfare spending, including capping subsidies for heating to exclude wealthy pensioners.

It also has its sights on the rich with a plan to reintroduce a 50p income tax rate, raise more taxes from properties worth more than 2 million pounds and tighten tax rules for hedge fund executives.

Balls said on Monday he would cut ministers’ salaries by 5 percent and freeze them until Labour balances the books, a move that was immediately criticized by the Conservatives as making only a miniscule impact on the budget deficit.

Labour leader Ed Miliband on Saturday announced a Labour government would raise the national minimum wage by more than 25 percent within five years if it wins power next year.

The proposal was met with concern from some business leaders who said it threatened to derail the way Britain’s minimum wages are set by an independent commission.

“Businesses are in favor of an evidence-based approach to the minimum wage rather than political parties using it to gain support from voters,” said John Longworth, head of the British Chambers of Commerce.

Additional reporting by Kylie MacLellan; Editing by Andrew Osborn/Jeremy Gaunt

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