Splits in Labour after Ed Miliband pledges to cap benefits

Splits have emerged in the Labour party over Ed Miliband’s decision to reverse his previous opposition to the coalition’s welfare cuts in a speech in London on Thursday.

Several leading members of the Labour left have spoken out against the plan to back measures such as child benefit cuts and a welfare cap – arguing that it plays into the hands of the government by accepting the need for spending reductions.

Neal Lawson, head of the leftwing Compass group, said the overriding message from this week would be that Labour was now in favour of “cuts, cuts and ditching universalism”.

Mr Miliband told an audience in east London that a Labour government would not reverse the coalition’s child benefit cuts and would implement a regional benefit cap. He also said he intended to bring down the welfare bill by building more houses, which he said would reduce the amount paid out in housing benefit.

The Labour leader said: “It is only by reforming social security with the right values that we’ll be able to control costs. Social security spending, vital as it is, cannot be exempt from that discipline.”

The speech is part of a renewed effort to win back voters’ trust in Labour to manage the economy. It follows a similar push by Ed Balls, the shadow chancellor, who said on Monday that he would accept the coalition’s current spending cuts for the first year of the next parliament, while borrowing more to fund capital spending.

The push to look as tough as the Conservatives and Liberal Democrats on the economy has alienated some on the Labour left, however.

Mr Lawson said: “They will all think that we are the same. The main message should be that Labour would do a multibillion-pound investment – not that we are the same as everyone else and you can therefore trust us.”

Many in the parliamentary party agree, including one former cabinet minister, who said: “I would be very worried if they are accepting spending limits for the first year or two of the next parliament. Why on earth would people want to vote Labour?”

Katy Clark, a Labour backbencher, gave voice to the concerns of many in the party when she said: “The concern about a cap will be . . . whether it would mean that some of the most vulnerable will lose out.”

But the speech has delighted many Blairites and others on the party’s right, who argue that it shows Labour is willing to take tough decisions in government – even if they still have suspicions over Mr Miliband’s leadership.

Paul Richards, co-founder of Progress, the Blairite group, said there had been a new “re-engagement with reality”. He added: “I think the leadership are unreconstructed lefties who have read the same opinion polls as the rest of us.”

Polls have repeatedly shown Labour trailing the Tories on economic credibility. Deborah Mattinson, who was Gordon Brown’s chief pollster, said the speech would go a long way to repairing that damage. She said: “There is a lot in this – the overall message on fiscal responsibility needed to be made.”

Possibly the most significant backing for the speech, however, came from the GMB union, which might have been expected to argue vociferously against moves to cap welfare. Paul Kenny, the union’s general secretary, said “Ed Miliband’s commitment to tackle the affordable homes crisis will be welcomed and applauded as the first positive step in dealing with the housing benefit scandal.”