Last updated: June 6, 2013 2:29 pm

Labour leader pledges to match Tory plan to cut welfare bill

Ed Miliband©Getty

Ed Miliband has pledged to match Conservative plans to cut the welfare bill as he looks to bolster Labour’s reputation for fiscal responsibility.

Speaking in east London on Thursday morning, the Labour leader said his party would introduce its own benefit cap, would keep cuts to child benefit and would put a cap on long-term benefit spending.

Mr Miliband said: “The next Labour government will have less money to spend . . . Social security spending, vital as it is, cannot be exempt from that discipline.”

In an argument likely to irritate some on the Labour left, the party leader said it “would not be the first priority” of a Labour government after 2015 to restore child benefit to higher earners, despite having previously said universal child benefit is “an important bedrock of our society”.

He also said Labour had spent too much on incapacity benefit while in power from 1997 to 2010. He added: “The last Labour government should have acted on it sooner.”

Mr Miliband’s plan to save more money on welfare spending hinges on building more houses to reduce housing benefit bills. He also said on Thursday that he wanted to give councils the power to negotiate with landlords on behalf of social housing tenants, which he argued would help bring down rents.

But he failed to spell out specific future cuts beyond the end to universal winter fuel payments, which was announced earlier this week and is predicted to save about £100m.

His speech was overshadowed by a row over a donation to Labour by John Mills, the entrepreneur, who gave the party shares rather than cash as a way of avoiding having to pay tax. The Labour leader refused a request by George Osborne, the chancellor to repay an estimated £1.5m in unpaid tax, insisting that Labour would pay tax on any dividends that flow from the shares.

After months of negotiations, Mr Miliband and Ed Balls, shadow chancellor, have agreed that Labour will stick within the departmental and welfare spending totals for 2015-16 laid down by Mr Osborne in his June 26 spending review.

Any extra spending by Labour would have to be offset by tax rises or cuts elsewhere; for example, Mr Miliband is looking at restoring the 50p top rate of income tax for high earners to reverse coalition cuts to working-age tax credits.

David Cameron called the Labour leader “weak” on Wednesday because of his willingness now to accept coalition cuts that he had previously opposed, notably the child benefit reforms.

Mr Miliband’s approach reflects Labour’s reluctant acknowledgment that the chancellor’s crackdown on the “welfare state” has won broad public support.

Mr Miliband insists his programme embraces Labour priorities within a tight spending settlement, including modest plans to extend the contributory element to welfare, where people with perhaps five years of national insurance contributions would receive higher unemployment pay.

Local councils and other employers would be given grants – such as help with buying new capital equipment – in “living wage” zones, where staff received above basic minimum pay.

Mr Miliband argued that the scheme could be funded through savings to the Treasury, as better-paid employees paid more tax and received fewer in-work benefits. He also announced schemes to tackle long-term unemployment.

“Controlling social security spending and putting decent values at the heart of the system are not conflicting priorities,” he said. The speech represents an attempt by him to show he is capable of taking tough decisions, and to at least neutralise welfare as a political weapon in the Conservatives’ hands.

Mr Osborne’s aides say Mr Miliband’s promise to show spending restraint is “incredible”, given his reluctance to set out any detailed cuts and his willingness to oppose spending reductions.

On Monday, Mr Balls said Labour accepted that de­partmental spending would have to fall in the next parliament, but only offered a £100m saving – the removal of winter fuel payments from wealthy pensioners – as evidence of his intent.


Recognising your weaknesses


Welfare: Ed Balls insisted on Monday that Labour had not overspent or been “profligate” while in power. But the public still has its doubts about the party’s economic management. Despite three years of flatlining growth, the Conservative party still enjoys a four-point lead over Labour on “the economy”, according to a survey this week by YouGov.

Leadership: Ed Miliband scores highly with the public on qualities such as “honesty” and being “in touch with ordinary people”. But the Labour leader is far behind David Cameron on attributes such as strength, charisma, leadership and decision-making. Despite this, he has maintained party discipline better than Mr Cameron, with few public rumblings of dissent.

Economy: Labour has long argued that if it were in government unemployment would be lower and, therefore, the benefits bill would fall. But the party still has a reputation for being soft on “shirkers”, allowing welfare to balloon during its time in power. Ed Miliband will on Thursday propose a benefits overhaul to “control costs” in an effort to change that image.

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