Battle over tax and spend escalates
Updated on 20 September 2009
Children's Secretary Ed Balls says he can cut £2bn from the schools budget, as a row erupts over Conservative claims that Labour is planning a post-election income tax hike.
Schools will be the first to suffer from government spending cuts, with Ed Balls's announcement of plans to slash £2bn from the education budget.
Three thousand senior posts, including headteachers and deputies, could be axed.
But Labour has been trying to turn the focus onto the Conservatives, dismissing claims that it plans to increase income tax.
Shadow Chancellor George Osborne says he has seen documents showing the future take from national insurance would be much less than expected.
Labour responded by accusing him of making a "schoolboy error". Chief Secretary to the Treasury, Liam Byrne, told Channel 4 News that "either George Osborne doesn't understand economics, or he is deliberately twisting the truth. Neither, I am afraid, is a qualification to be Chancellor."
Mr Balls is the first cabinet minister to outline how cuts would affect public services, following Gordon Brown's admission that they would be needed in his speech to the TUC conference this week.
In an interview with the Sunday Times, Mr Balls said up to 3,000 senior schools staff could be axed as schools are merged into "federations" run by a single team. He suggested most of the posts, including heads and deputies as well s bureaucrats, could be lost by "natural wastage".
He also warned teachers they would have to accept pay restraint to keep staff on the frontline and suggested the axe could fall on teams of Whitehall advisers.
"It is going to be tougher on spending over the next few years," said Mr Balls of the post-2011 squeeze that will see up to 5 per cent taken off school spending.
Liam Byrne defended the announcement, telling Channel 4 News that "every department has over the last few months been looking at their budgets and how they can make efficiencies, for the very simple reason that we hate debt and we know that it's a necessary evil to help us get through the downturn as a country in one piece."
His announcement follows claims by Conservative shadow chancellor George Osborne that leaked Treasury documents reveal an unexplained £14.8bn hike in expected receipts in 2001/12 that could require a 3p tax rise.
"Labour's secret spending plans, which Gordon Brown never wanted to make public, appear to reveal an income tax bombshell," Mr Osborne said.
"Income tax receipts are set to rise by a third. Are they asking us to believe that this is due only to recovery from recession and the 50p rate?"
The Treasury angrily denied the claim, which was also dismissed by the Liberal Democrats and met with scepticism by economics experts.
Officials said the statistics were published at the time of the Budget and insisted it would be illegal for them to include the impact of unannounced policies in projections.
Treasury Chief Secretary Liam Byrne said the increase was explained by recovery in the economy as the country comes out of recession and existing tax plans such as the 50p rate for top earners.
Mr Byrne accused Mr Osborne of "trying to mislead the public" and said the claims raises "serious questions" about the shadow chancellor's judgment.
"Osborne's claims are false. These Government tax projections are already published and are in the public domain.
"They simply set out what is raised by our existing published measures as the economy returns to growth. No more, no less."
Liberal Democrat economics spokesman Vince Cable said Government figures were overly optimistic but said he believed the Tories had "put two and two together to make five".
And Robert Chote of the Institute for Fiscal Studies told The Observer that there was "no hidden policy change here".
