November 10, 2010 7:16 pm

Labour to attack Brown’s record on economy

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Alan Johnson, the shadow chancellor, is to launch an attack on Gordon Brown’s stewardship of the economy, saying he allowed Britain to become overdependent on tax receipts from the City and housing.

Mr Johnson’s admission that Labour presided over “an unbalanced economy” is part of a strategy to show that he has learnt the lessons of the past and to help rebuild the party’s economic credibility.

He privately admits Labour has been sidelined in the economic debate since the election, allowing George Osborne, chancellor, to present Labour as wreckers of the economy and living in a state of “deficit denial”.

Mr Johnson has mapped out a strategy, starting on Thursday, which initially sees Labour recognising mistakes of the past, addressing what he sees as a serious omission on the part of Mr Brown.

The second stage will see the shadow chancellor start to identify areas of public spending that Labour would cut, in an effort to gain “permission” to start talking about the deficit with a degree of credibility.

Meanwhile, Mr Johnson and Ed Miliband, Labour leader, have issued an edict requiring shadow ministers to clear any statements or speeches they make that commit the party to higher public spending.

Mr Miliband has been advised by Neil Kinnock, Labour’s former leader, that the party made a serious error in failing to impose tough discipline on spending soon after the Conservative election victory in 1987.

“By the time the next election came around in 1992, the Tories added up every commitment made by every spending minister in the previous five years and came to a very big total,” said one Labour official. “We won’t make that mistake again.”

Mr Johnson’s appointment was a signal by Mr Miliband that he wanted to occupy the economic centre ground.

Mr Johnson will repudiate part of Labour’s economic legacy in a London speech, saying it should have been obvious that the country was overreliant on the City and a housing bubble.

“A proper understanding of how reliant our tax base had become on certain sectors should have made clear that our economy was too narrowly focused,” he will say

However. the shadow chancellor will also argue that the coalition has peddled “myths” about Labour’s economic management, pointing out that City corporation tax receipts helped to put the public finances in good shape – until the crash hit.

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