Leaders pitch to business

Ed Miliband and David Cameron will trade blows at the Confederation for British Industry (CBI) today, as both men make their pitch to the country’s business leaders. Mr Miliband will argue that the Tories have failed to understand the lessons of the financial crisis and are devoid of plans to stimulate growth in the economy. The crisis has led to realisation among Labour figures that government must support enterprise more robustly, Mr Miliband will admit. “Without profound change in the way we manage our economy, we are at risk of, at best, sleepwalking back to an economy riddled with the same risks as we saw before the recession hit,” he will say. “The way to support business and ensure a return to prosperity is to tackle these risks, not ignore them.” Mr Cameron will use his speech to promise a tougher competition regime to help small companies break into existing markets and the creation of ‘technology innovation centres’ so British companies can be at the forefront of innovation. – Politics.co.uk

THE GOVERNMENT should take a more active role in the private sector, Ed Miliband will say today, as he warns against returning to “business as usual” in the wake of the slump. Speaking at the CBI’s annual conference, Miliband will argue that government should not shy away from pursuing a policy of industrial interventionism. “What it means to be pro-business in the 2010s is different to what it meant in the 1990s. It means more than just getting out of the way,” he is expected to say. “Government should not be afraid to provide support to business that the market will not offer. That is the way to rebalance our economy.” Miliband will also claim the government has become obsessed with spending cuts at the expense of an economic strategy, a charge the Prime Minister will try to deflect with a series of pro-growth announcements to day. – City AM

Nobel Prize-winner questions Osborne

There are particular concerns about where the private sector jobs will come from for the 490,000 public-sector workers who are expected to lose their jobs. The chancellor, George Osborne, was yesterday accused by Britain’s new Nobel Prize-winning economist, Christopher Pissarides, of exaggerating the risk of a Greek-style economic crisis affecting the UK economy. In an article for the Sunday Mirror, the professor warned that Osborne’s swingeing cuts package was taking “unnecessary risks” with the economy. “It is important to avoid this ‘sovereign risk’. But in my view Britain is a long way from such a threat, and the chancellor has exaggerated the sovereign risks threatening the country. Unemployment is high and job vacancies few. By taking the action that the chancellor outlined in his statement, this situation might well become worse.” – The Guardian

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The alternative

Prime Minister David Cameron pursues his plan to fix the battered British economy with austerity, his main foil in the debate over how deeply to cut government spending will be Ed Miliband, the young, untested leader of the opposition Labour Party. Mr. Miliband is an unlikely standard-bearer in the global debate over how best to pull nations out of economic doldrums. One of the loudest arguments in that debate came Wednesday, when the U.K. laid out £81 billion ($127 billion) in budget cuts over the next four years—the latest European government to demonstrate a belief that recovery will be built on austerity measures and a balanced budget.Mr. Miliband is among those counter-arguing that slashing spending will sap demand and forestall a fragile economic recovery. “This is a global economic battle and people will be citing the U.K. around the world. So Ed Miliband has to stand up and say, ‘There is an alternative”‘ to steep cuts, said Joseph Stiglitz, a Columbia University professor and winner of the Nobel Prize for economics. But Mr. Miliband may disappoint anyone expecting him to fully torpedo Mr. Cameron’s plan. Unlike the Obama administration in the U.S., which continues to look at ways to prime the economy with government intervention, Mr. Miliband has less room to take such a position. – Wall Street Journal

In an outline of the basic foundations of the party’s alternative to the coalition’s record £83 billion in spending cuts, Mr Johnson said investment would be a more effective way of reducing the £155 billion national deficit and producing economic growth. Radical plans to make banks pay a £7.5 billion levy towards a “push for growth” are contained in the broad strategy. It was the first time since the 2009 Budget that Labour’s official policy has focused on investment as part of the solution to the current crisis. Mr Johnson accused the Government of “taking a huge gamble with growth and jobs” but in a radio interview said that the threat of a “double-dip” recession may yet be averted. – Tribune

Broken Promises

Both Mr Cameron and Mr Clegg ate humble pie before the audience. Mr Cameron acknowledged that he had gone back on an election pledge not to cut child benefit. “I had to eat those words. But is it right to go on asking people on £15,000, £20,000 or £25,000 a year to keep paying so that Nick and me and [Labour leader] Ed Miliband can go on getting child benefit?” On the decision to sharply increase tuition fees for university students from 2012, when they will double in most cases and, perhaps, more than double, Mr Clegg, whose party has longed wanted their abolition, said: “It’s one of the most difficult things I’ve ever had to do – to own up to pledging things I now feel I cannot deliver.” In a bid to shore up support among Liberal Democrat MPs and supporters, Danny Alexander, the party’s chief secretary to the treasury, wrote to party members, saying: “We have made the tougher choice, no doubt, but we should be proud of the way we have taken responsibility and we have done the right thing.” – Irish Times

David Cameron and Nick Clegg today expressed regret for breaking election pledges when they faced an audience at a question-and-answer session in the aftermath of the government’s spending cuts announcement. The prime minister admitted he had to “eat his words” over child benefit, under questioning from audience members who were angry that both parties had reneged on promises made before the election. Clegg said he felt “really bad” when asked by a sixth-former about his U-turn on tuition fees. – Guardian

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The Spending Review

Margaret Thatcher is lying sick in a private hospital bed in Belgravia but her political children have just pushed her agenda further and harder and deeper than she ever dreamed of. When was the last time Britain’s public spending was slashed by more than 20 per cent? Not in my mother’s lifetime. Not even in my grandmother’s lifetime. No, it was in 1918, when a Conservative-Liberal coalition said the best response to a global economic crisis was to rapidly pay off this country’s debts. The result? Unemployment soared from 6 per cent to 19 per cent, and the country’s economy collapsed so severely that they lost all ability to pay their bills and the debt actually rose from 114 per cent to 180 per cent. “History doesn’t repeat itself,” Mark Twain said, “but it does rhyme.” George Osborne has just gambled your future on an extreme economic theory that has failed whenever and wherever it has been tried. – The Independent

Butcher George Osborne’s brutal £81billion attack is unfair and avoidable. Yet Conservative MPs celebrated the job losses, cheered the austerity. This is, as Labour’s Alan Johnson neatly put it, an ideological moment. David Cameron’s deficit deceivers are using debt as cover to slash and burn their way across Britain.Cut-crazy Ireland’s reeling from a double-dip recession, France is going up in flames. The backlash here will not be pretty when people feel Osborne’s crude blade. On a national level unemployment will soar, half a million sacked in public services with accountants warning as many again could go in private firms. Economic growth will be choked and could go into reverse. And on a personal level we will all suffer with the most vulnerable paying the highest price. – The Mirror

The Commons was raucous, and Johnson made much of the sight of Tory MPs waving their order papers – apparently with excitement – during Osborne’s announcement. He said: “Members opposite are cheering the deepest cuts in public expenditure that have taken place in living memory. For many of them, this is what they came into politics for.” Johnson made light of the fact that, during the last comprehensive spending review in 2007, Osborne had supported Labour’s spending plans until after the scale of the credit crunch became apparent “well after the collapse of Lehman Brothers in America set off a disastrous chain reaction around the world”. The Liberal Democrats, he said, had changed position on whether cuts would be justified this year between the ballot box closing and the door of the ministerial car opening. – The Guardian

The government’s great triumph so far has been to portray anyone who opposes their plans as moronic. True, there are a few winners of the Nobel Prize for economics and other lowlifes against them, but they’re just foreigners. The British seem to have bought into the whole thing. Hit us. We deserve it. Just as long as you hit our enemies harder: the banks, the bureaucrats, the quangos, the MPs, the workshy. They were all duly sandbagged. We seem to be in one of those brief periods when the sceptical British have suspended disbelief, as they did before the Iraq war and every time England ever play in an international football tournament. The government’s grip on the politics tightened on Wednesday. In contrast to last week, Mr Cameron was in fine, patronising form and wiped the floor with a verbose and hesitant Ed Miliband at the question time session before the cuts statement. – The FT

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“Cash driven” defence review

Mr Cameron denied the review was simply a “cost-saving exercise”, saying it was instead a “step change in the way we protect this country’s security interests” But Mr Miliband told MPs it was a “complete shambles”. “It is a spending review dressed up as a defence review, it has been chaotically conducted, it has been hastily prepared and it is simply not credible as a strategic blueprint for our future defence needs,” he said. In the House of Lords, those criticisms were repeated by Lord Boyce, who was chief of the defence staff from 2001 to 2003. “I cannot say I welcome the statement on this cash-driven defence review and I certainly can’t possibly dignify it with the word ‘strategic’,” he said. “It will be viewed with dismay by our hardworking and operationally oppressed sailors, marines, soldiers and airmen.” – The BBC

AN MP has accused the Government of “playing politics with national security” and putting jobs at risk after delays to the Trident successor programme were announced yesterday. Barrow and Furness MP John Woodcock spoke out after prime minister David Cameron announced the replacement for the Vanguard submarines would not come into service until 2028 – a delay of four years. In the Commons, Mr Woodcock challenged the prime minister over the cost of the delay. He said: “The prime minister reassured the people of Furness that he was committed to replacing Trident – but this delay will generate unnecessary worry and uncertainty for workers in Barrow shipyard and the many businesses whose future depends on the prosperity the yard generates. “Instead of showing leadership in the long-term interests of the country, Mr Cameron has bowed to pressure from within his government and kicked Trident into the long grass. But playing politics with Britain’s national security like this puts jobs here at risk and will cost the taxpayer far more overall.” – The North West Evening Mail

Shadow defence secretary Jim Murphy described the arrangement as “peculiar” and “driven by finance”. He told the BBC: “What’s the purpose of an aircraft carrier if not to carry aircraft? And I think to leave our country without a single fixed-wing aircraft able to fly off our aircraft carriers for a decade is a very worrying decision. “It can’t be driven by security needs or strategic needs. No-one based on the security needs of our country would come to the decision that a decade without an aeroplane on an aircraft carrier is the right decision.” – The BBC

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The economic alternative

Ever since George Osborne followed me into the Treasury he, and his Lib Dem colleagues, have been trumpeting the virtues of Draconian cuts in spending. They use the deficit as an excuse for excessive public sector cuts. There must be cuts but in the current climate any government’s priority should be growth, as I said and my colleague and successor Alan Johnson set out yesterday. The Labour government made growth and jobs a priority. We stopped the recession turning into a depression, and kept people in jobs and in homes. The Tories cite the example of Greece and the threat of downgrading from credit rating agencies to scare people. Parallels should not be drawn between the UK and Greek economies and they know it. The Coalition inherited a triple-A rated economy and in the months since Labour left office growth has risen faster than I predicted and borrowing is lower. The Government’s austerity plans threaten to derail recovery. – Alistair Darling, The Mirror

He did say that “Ed Miliband and I are clear” that halving the deficit over four years is the correct policy. “Our policy remains to halve the deficit by 2013, ’14”. But he immediately added that tax must “do more of the work” to balance the budget. He emphasised that “public services matter”, calling for an approach that “values public services” not one that “relishes curtailing them”. He said the approach must be flexible enough to react to changing circumstances — reminded his City audience of the Irish reversion into recession. And he highlighted the “biggest difference” between the Labour and Government positions as “the need to return to growth”, pointing out that “a rising dole queue means a bigger dole queue”. – The New Statesman

Accusing the Coalition of basing its timetable of cuts on the 2015 General Election rather than the economic needs of the country, Mr Johnson used his first speech in his new role to announce Labour would sting the banks for more money – an extra £3.5 billion on top of the UK Government’s already announced £2.4bn bank levy. “The banking sector is contributing £2.4bn whilst child benefit freezes and cuts will raise substantially more, so families take the strain while bankers grab the bonuses,” insisted Mr Johnson. “There’s no justification for such an unfair sharing of the burden, so we will ask the Government to think again and come forward with proposals for the banks to make a greater contribution.” While Labour would not increase personal taxation any further than planned, Mr Johnson said he accepted the Lib-Cons’ freezing of the basic rate limit for income tax from 2013. – The Herald

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AJ to “push for growth”

Johnson pushing for growth

Alan Johnson, the new shadow chancellor, has suggested banks should pay an additional £3.5bn a year in taxes on top of the £2.5bn annual bank levy already introduced by the coalition. Mr Johnson will set out his thinking in a speech in the City on Monday, but has made it clear that he wants higher taxes to play a bigger part than public spending cuts in the deficit reduction. The shadow chancellor said the pace and scale of Mr Osborne’s planned £83bn spending cuts were “masochistic”. He argues that deficit reduction should go hand-in-hand with more infrastructure investment. Mr Johnson’s proposal to raid the banks to pay for this investment was questioned by the Tories after he appeared to suggest that a new bank tax would only proceed if there was international agreement. Labour officials later said that Mr Johnson regarded international consensus as desirable – but it was not a precondition. – The FT

Alan Johnson, the shadow Chancellor, has said that banks should take a more prominent share in plugging Britain’s budget deficit, as he attacked the Government for its “perverse” plan to bring public spending under control. Mr Johnson, who admitted he was “mildly surprised” when he was given the job by Ed Miliband, also revealed that Labour would consider increasing capital gains tax to help to avoid the brutal £83bn spending cuts being lined up by the Chancellor, George Osborne. In his first major interview in his new role, Mr Johnson conceded Labour would have to be “more specific” about its economic plans, but promised to set out further details on tax policy during a major speech today. “We think tax, on the banks in particular, should play a bigger role in this,” Mr Johnson told the BBC One’s The Andrew Marr Show. – The Independent

Shadow chancellor Alan Johnson is to accuse the Government of taking a “huge gamble with growth and jobs” as he sets out Labour’s alternative to the Treasury’s £83 billion cuts package. In his first major speech in his new role two days ahead of the comprehensive spending review, Mr Johnson is expected to reject Chancellor George Osborne’s argument that Britain’s structural deficit must be eliminated within four years, and insist: “There is another way.” The shadow chancellor is expected to unveil plans to make the banks contribute towards investment in infrastructure as part of a £7 billion “push for growth”. On Sunday Mr Johnson accused the coalition Government of “economic masochism”, warning that by cutting “too deeply and too quickly” it risks pushing Britain into an L-shaped recession in which the economy fails to recover momentum and “bumps along the bottom” for a period of years. Unless growth is supported, Britain could repeat Japan’s “lost decade” of economic stagnation, he suggested. – The Press Association

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What’s the alternative?

Radical plans to make banks pay the lion’s share towards a £7bn “push for growth”, to be unveiled by Labour on Monday, will be at the heart of Ed Miliband‘s alternative to £83bn of proposed government cuts. In his first major speech as shadow chancellor, ahead of Wednesday’s spending review, Alan Johnson will accuse the government of taking a “huge gamble with growth and jobs” by concentrating solely on deficit reduction. Johnson, who has been working closely with the new Labour leader to define a clear alternative, will say it is fundamentally unfair that cuts to child benefit should play a bigger role in reducing the deficit than the banks that did much to cause the economic crisis. In a departure from Labour’s policy at the general election, Johnson will call for a big increase in capital spending on road building and construction – probably funded by a far higher levy on banks and action against bankers’ bonuses – to boost economic activity and create jobs. – The Observer

Peter Hain is wizened counsellor to young king Ed, or gives that impression at least. The two are close, which makes Hain’s recent comments on tax noteworthy. Hain describes universal benefit as ‘non-negotiable’, adding: “If you start driving a coach and horses through universality you’re effectively saying to middle Britain, ‘you’ve got no stake in the welfare state.’ I think the Tories and Liberals are making a very big mistake on child benefit. There’s an answer to people on higher incomes and that’s they pay higher taxes. And that is the answer to squaring that circle.” Miliband is determined to defend universal benefit regardless of cost and he also favours a 50:50 split between tax hikes and spending cuts to reduce the deficit – a policy that would require £61bn to be raised in tax. Miliband and Alan Johnson will reveal Labour’s economic policy on Monday; expect it contain a fetid dram of Old Labour. – The Spectator

Osborne sharpens the knife

Even before Chancellor George Osborne makes his announcement, we know it is going to be terrible. What we aren’t yet sure of is the scale of the harshest blows. What has become clear is that the most vulnerable will suffer the most. In particular, the elderly and those in poverty are going to be hit hardest. Yes, the middle classes will be affected but those who can least afford to lose anything will be crippled. Although the Government was panicked by last week’s Sunday Mirror revelation about pensioners’ allowances being slashed and swiftly backed off, older people will still be targeted. – The Mirror

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Hain on tax

One of Ed Miliband’s closest allies has backed a tax increase for higher earners as Labour prepares to reveal new details about his plan to deal with Britain’s budget deficit. Peter Hain, who was part of Mr Miliband’s leadership campaign team, said an increase in tax on the wealthy would “square the circle”, allowing Labour to avoid the Coalition Government’s controversial cut to child benefit. His intervention comes as the new shadow Chancellor, Alan Johnson, prepares to make his first major speech in the role on Monday. Mr Johnson has also agreed to television interviews over the weekend. – The Independent

Mr Hain told website Labour Uncut: “I think the Tories and Liberals are making a very big mistake on child benefit. “There’s an answer to people on higher incomes – they pay higher taxes. And that is the answer to squaring that circle.” Former Welsh Secretary Mr Hain is party leader Red Ed’s new policy chief. He also hinted that new Shadow Chancellor Alan Johnson may be overruled by Mr Miliband to set the party’s economic policy. It could mean paying back the deficit more slowly than Mr Johnson would like. Mr Hain said: “People forget Ed is an economist. He’s got a very clear idea of where he wants to go on the economy and the deficit and we’ll set that out. We’ll both be offering a serious alternative.” – The Sun

Ed’s week

Reflecting on his performance in the Commons, Mr Miliband is pleased. He wants to set a new tone, although he stops short of falling into the same trap as the Prime Minister who pledged to end “Punch and Judy” politics when he became Leader of the Opposition, only to fail miserably. “I want to use PMQs to ask serious questions the country wants to know the answer to, because I don’t think people particularly want a lot of political point scoring,” he says. “I think it’s unrealistic to say you’re never going to have that – and I didn’t say that – but I think you need it to be a place where serious issues get debated. It went well this week, it’s a long game and we’ll see what happens in future weeks.” In preparation for the big event, Mr Miliband’s team considered the topics they could raise and plumped for child benefit, a raid on the incomes of higher-rate taxpayers in middle England – voters whose support he will need to win power. – The Yorkshire Post

The press’ attention was temporarily distracted on Wednesday, when Ed Miliband entered the Commons for his first PMQs as opposition leader. The press gallery was stunned to find the man they had patronised for two weeks easily beat David Cameron in a confident and businesslike manner. – Politics.co.uk

No one would begrudge Ed Miliband the plaudits for his fine first performance at PMQs. He has made a good start and seemed to take David Cameron by surprise. The Labour leader has a small, under-resourced team, which has been devoted much of the last week to preparing him for the task of his first confrontation with the Prime MInister. This is simply not sustainable. The weekly duel, terrifying though it may be, cannot come to dominate his thinking – however good he comes to be at it. – The Spectator

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