Ed Balls warns of ‘unpopular’ choices

Mr Balls used his keynote speech at the final Labour conference before the general election to confirm Labour’s commitment to running a budget surplus by 2020.

As well as curbing public spending on benefits, Mr Balls said he would cut ministers’ pay and reintroduce the 50p top rate of tax, saying: “Labour will balance the books in a fairer way.”

The Conservatives said Labour’s spending plans would mean borrowing nearly £28.3bn a year over the next parliament.

Mr Balls told the conference in Manchester he would stick to “fiscal responsibility in the national interest” in order to cut a deficit still running at £75bn, adding: “We will have to make other decisions which I know will not be popular with everyone.”

Benefits capped

He said: “I want to see child benefit rising again in line with inflation in the next parliament, but we will not spend money we cannot afford.

“So for the first two years of the next parliament, we will cap the rise in child benefit at 1 per cent. It will save £400 million in the next Parliament. And all the savings will go towards reducing the deficit.”

Under the coalition, child benefit was frozen from 2010 to this year. It went up by 1 per cent in April and is due to rise by the same amount in 2015/16.

A Labour government would also set limits on structural welfare spending, keep the coalition’s £26,000 benefits cap and cut the winter fuel allowance for the richest 5 per cent of pensioners, Mr Ball said.

He said every government minister would take a 5 per cent pay cut, and the rich would be hit by a return to a 50p top rate of tax and a mansion tax on properties worth more than £2m.

Firms that pay the living wage would get tax breaks under Labour and the national minimum wage would rise to £8 an hour by the end of the next parliament.

‘It was a mistake’

Mr Balls said Labour had made mistakes during its 13 years in power, saying: “We should have had tougher rules on immigration from Eastern Europe – it was a mistake not to have transitional controls in 2004.”

And looking back at the banking crisis, he said: “The truth is, we should have regulated those banks in a tougher way. It was a mistake. We should apologise for it. And I do.”

Mr Balls said a Labour government would repeal the NHS Bill to “stop the creeping privatisation of the National Health Service” as well as scrapping the so-called “bedroom tax“.

The shadow chancellor pledged that there would be “no proposals for any new spending paid for by additional borrowing” in Labour’s election manifesto.

‘Labour haven’t learned’

But the Conservative business minister, Matthew Hancock, said: “As the Institute for Fiscal Studies say, Ed Balls’ policy means £28.3 billion more borrowing per year in the next parliament.

“Labour haven’t learned their lesson. They would burden our children with more debt than our children could ever hope to repay.”

The Children’s Society said the continued child benefit squeeze would leave the average family more than £400 per year worse off by 2017 and represented a major real-terms cut to 13 million children.

Chief executive Matthew Reed said: “We urge the shadow chancellor to reconsider so that children and their already struggling families do not suffer even more unnecessary hardship.”