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Press Conference: Labour's 1995 Shadow Budget
Good afternoon, 
With the government releasing its feel good budget I understand as the prospective next government all eyes will be on the Labour Party. What can we offer the country in comparison and can we spell out how we would deliver? With this Shadow Budget I hope to prove definitively that Labour can be trusted with taxpayers' money, both in how we collect it and how we spend it. It is a budget centred around a trio of core values that I believe define what the Labour Party and the British economy can be at their best: sustainability, fairness and investment. 

I've often called the Chancellor 'Hapless Harold', and I can admit to you all I'd wondered if I were too harsh. This budget has made it absolutely clear that if anything I was understating the problem: the Chancellor's approach to the economy is not so much hapless, it is dangerous. I sympathise with the rush many British people felt at the headlines this budget produced, with a crucial tax cut here and there and a spending splurge on public services that have been underfunded by this very government for decades. But with any rush there is a comedown, and I fear strongly for the long term consequences of this budget's comedown. This is a budget designed to generate good headlines, but not a good economy.

The Chancellor wants to pretend that the past few decades did not happen. To pretend that his budget can right every wrong successive budgets he voted for had created in one big swoop. To pretend that similar fiscal strategies - or electoral strategies - pursued by Tories of past had not ended in tears. To pretend that we have not come out of a devastating recession and that there are no hard choices that have to be made. We've heard about Lawson and Barber's booms; we're in for a Saxon one. The Tories have calculated a sudden shift in economic strategy will gain them more votes, but the core Tory economic strategy of putting the British people through boom and bust repeatedly remains.

The Tories say they offer pearls you apparently get when you go deep sea diving in Madagascar... a normal activity for the Defence Secretary, I'm sure, but not one for you or I. But their pearls are fake and they're ripping you off. I'm not here to offer pearls and prose. I'm here to offer solutions and a stable economy that is able to invest in public services, infrastructure and a hand up to working Britons in the long term. That is the budget I present. 

The Tories' fiscally irresponsible budget cuts the deficit by less than a hundred million. This would mean it would on an optimistic projection take fifteen more years for us to tackle our deficit and have a budget surplus. That is fifteen years of building debt which adds billions that will be spent on interest instead of our pensioners or policemen. I can confirm Labour's Shadow Budget commits us to eliminating the deficit by the millennium, leaving us with a surplus that can pay down our debts, lower our taxes and invest in our public services. 

This Shadow Budget shows that Labour is committed to sustainable investment and responsible spending, with spending as a percentage of GDP actually decreasing as a result of this budget and taxation as a percentage of GDP rising as almost half the pace of the Tories' tax hikes in this budget. The Tories have thrust at least another £143 per person in taxes - making that almost a tax hike of £1000 per person since they have taken office. They do not even distribute their tax rises fairly, preferring to make oil barons get a tax break while pushing the poorest Britons into income tax. Their newfound position on taxation has the same old Tory unfairness with irresponsibility thrown into the mix. 

As Shadow Chancellor I want to make it clear that broken clocks are right twice a day, and it is important to support the government where it gets it right. Thankfully, the government struck right when it came to something as crucial as monetary policy. With growth projected to hit nearly 4% even before the government's spending free and inflation appearing to rise, it is crucial we raise interest rates to temper a future boom and bust scenario. The government has made it clear that the Bank of England have advised they take this course, which proves how crucial it is we keep experts involved in these crucial decisions. It is frankly a shame that the government's fiscal irresponsibility completely undermines this piece of monetary sanity. 

I also support this government's attempt to sustainably reform income tax to make it fairer and simpler: we should aim for a 20% basic rate of income tax, and once that is achieve gradually rise personal allowance so we can begin to lift the poorest out of tax altogether. It is a shame the government have decided to fund this pledge by refusing to raise the tax bands with inflation - a cold and unfair policy that puts more of the poorest in income tax or paying more of it and more middle class families paying a higher rate of income tax. The government has pulled the same stunt with national insurance, while Labour will ensure we lift more of the poorest families out of NI altogether by having a lower threshold of £70 and raising the higher threshold with inflation. 

I can promise that to promote sustainable investment, growth and jobs this government will also be reforming our tax policy so that it is friendlier to business. The government think they can offer small businesses gruel and be done with it. I respectfully disagree. That is why I have proposed doubling the corporation tax cuts to small businesses in comparison with the Tories, alongside a small but significant reduction of 0.10% to employers' NI contributions, easing the tax burden from them and promoting job growth in the process. 

But the deficit is high and sacrifices are going to be made if we're to cut taxes for working people as well as freezing the higher rate of income tax, capital gains tax and inheritance tax. Somebody is going to have to foot the bill. The government have made it clear they would like the cost to be shifted onto working people. I want to make sure those who have accumulated wealth make that decision, which is why I have proposed a progressive structure of stamp duty to raise almost £3 billion. I have lifted the lowest rate of stamp duty to ensure houses have to be worth £75,000 before stamp duty is even applied - a 15% rise in the thresholds - and ensuring that only those capable of buying a house worth double the national average begin to pay the higher rates. These decisions are tough but it is the fairest and most fiscally responsible route to take while the deficit is so high. 

We have also ensured that more indirect taxes are reformed so that they benefit working people. We have kept vehicle excise duty and fuel duty frozen, and have refused to impose the 2% 'safety tax' the Tories levelled on the insurance premium tax. I am proud to announce we have also ensured that we cut VAT by 1% to 16.5%, making products cheaper for all - but especially the poorest - and stimulating the economy. But more importantly, we have reduced the tax on electricity and domestic fuel to 5%, the legal minimum in harmony with European law. 

The Tories don't have a track record of keeping the lights on - we all remember the three day week. Neither do they have a track record of keeping their promises. It's no surprise, then, that they rejected Labour's attempt to right their wrongs and have kept the tax at 8%, breaking their promise to the electorate and leaving pensioners and the poor in the literal cold. It is shameful and their decision to impose this tax means it is irreversible. But I pledge to every Briton watching I will keep this tax as low as possible, and fight whoever I need to fight to get this tax zero rated as it should be. 

I am glad to see the Conservatives adopt Labour policy by removing the VAT exemption on betting and gambling. For too long gambling companies have been given a tax break by hard working Britons to set up shop while offering nothing tangibly beneficial to Britain's social fabric. Yes, we should welcome business where it is set up, but no other business gets such a tax break for no tangible reason. I am glad to see this anomaly in our tax system has been removed. 

It is a shame they spent that proceeds of that money alleviating oil barons from across the world instead of British households. We've seen the Tories scramble for excuses to justify imposing this tax on the most vulnerable. One of them was that it would tarnish our international commitments to reduce carbon. Their tax breaks to oil barons and their significant cut to fuel duty prove that this was shameless straw clutching and it undermines every effort the Conservatives made to voters that they could be trusted on the environment. 

We also have concerns about raising the gambling duty on top of this VAT hike. While some gambling bosses and companies are unscrupulous and we can use the tax system to right their wrongs, the Tories' tax proposals will mean many of these companies will overnight be paying more than a quarter of their profit in tax. This is not a sustainable change. So too do we support the principle of raising tobacco duty to fund the NHS, but again we feel these tax increases have been too rushed and too concentrated - making the taxing strategy unsustainable, which is why we will only raise these duties at half the pace the Tories have. 

As Shadow Chancellor, I draw the line on the Tories' change to alcohol duties. Our alcohol duties are amongst the highest in Europe, and any increase hurts the pockets of the poorest most as well as threatening the service industry and the hundreds of thousands of jobs it supports. That is why I will cut beer duty by a penny as the Tories raise it by one, will keep wine duty frozen in real terms and cut spirit duty in real terms.

But now onto our spending proposals. Harold Saxon says he commits to a programme of 'smart spending.' I actually do it. Immediately you look at the departmental breakdown to see the Conservatives have once again put funding priority to their Westminster clique, throwing money at Whitehall instead of forcing it to tighten it belt in the wake of recession. Harold Saxon's view of 'smart spending' appears to be like my husband's: if he gives me his credit card and lets me spend to my heart's content, I may get off his case, but it is not the right decision for our household just as this is not the right decision for our economy.

This Chancellor would rather spend, spend, spend so that his office never has to cut costs while his tax changes force pensioners to choose between heating or eating. I take no shame in saying that is wrong and it is time for Whitehall to show restraint. 

There are better places for that funding to go, such as giving the Housing Ministry all the funds it has asked for so it can effectively ensure home ownership can be an aspiration every Briton can strive for as we have. It could also be used to invest properly in international development so that we meet our international commitments comfortably. This investment is practical, giving poorer countries the opportunity to grow and create a more stable global economy and increasing Britain's global standing and voice as it becomes an aid superpower - but it is moral and right too. I'll be honest: the Tories' proposals do not go far enough, but I am heartened to see them ditch the Conservative orthodoxy for all too long that has viewed international development as a rump of fat attached to the Foreign Office.

It is good to finally see the Conservatives have invested properly in our police force and in our prisons as crime has skyrocketed, though this must also be met with common sense reforms to ensure the police force is more efficient and the harshest criminals feel the full weight of the law should they commit the most egregious crimes. Labour have ensured that the Home Office budget has been largely mirrored, though we have ensured that our investments in the fire service are more tempered for now. We also strongly question why the government has spent more than £100 million pounds in prison skills, education and drug treatment when these places were not even requested by the rehabilitation services - proof the Conservative mantra of 'smart spending' is little more than doublespeak. 

We also ensure that public sector workers get a small real terms pay increase, applying the 2% the Conservatives have: this ensures our public sector workers aren't left without while ensuring our spending promises do not go overboard. However, we reject the 2.5% increase applied to the police force and prison officers by the Conservatives. It is understandable why some feel the police would need a larger increase, but it begs the question - why does this funding not go to our troops, our nurses and our teachers? To that end, Labour has ensured public sector pay has been applied equally across the board.

Like the Conservatives, we have committed to investing in our armed forces - ensuring that every request from the Ministry of Defence has been granted. Any sensible government's primary role is to keep its people safe, and the party that was crucial in establishing NATO and giving Britain has valued nuclear deterrent takes that role and sacred responsibility extremely seriously.

On transport we do not throw money at the system in the way the Conservatives have and hope to capitalise from a boom so large it pushes inflation our of control in a way that chokes out any proceeds of growth: the Conservatives' spending spree is so bizarre and illogical they have decided overnight to double the maintenance budget with no rhyme or reason, costing the British taxpayer over £300 million pounds. We show the country what smart spending really is, and ensure 10% of requests asked for by the department of transport are granted, ensuring there is sustainable investment for sustainable growth.

We also believe the Tories have made the right investments into our regions and have mirrored these investments, with one exception: while the deficit is so high, we cannot invest over £200 million into social and cultural projects - this is an area we feel the private sector can sufficiently step up and provide for in the time being. 

Nothing emphasises the government taking the right direction in a completely incompetent manner and its lack of sustainable investment than its scattergun approach to NHS spending. We welcome them granting the NHS the full funding it had asked for, and mirror that in our own budget. However, we are critical of the Conservatives' scattergun hospital building target which means no requested targets are met and more and more money is burned. Studies have made it clear smaller hospitals are associated with stronger outcomes, which is why we have prioritised the building of smaller hospitals and clinics - meeting over half of the targets set. We also ensure prescription charges are six pence less than the Conservatives, a small but significant change that ensures less NHS funding is taken from the pockets of the sick. Labour continues to prove it is the party best trusted on the NHS, with less money spent and better outcomes: that is smart spending. 

As I have stated before, having come out of recession and inheriting a large deficit as a consequence of that recession we do feel culture and sport spending needs to be scaled back gradually: both because funding should be prioritised towards essential services such as health and infrastructure, and because the private sector is able to fill that gap. However, we do feel that the Tories' cuts in these departments go further - over £200 million in that budget will mitigate any extra investment they had put towards Scotland and Wales, and would leave England out in the cold. We also fear a ten pence rise in museum admission fees will harm Britain's cultural strength, the pockets of working families that bit more and museums should it discourage attendance. 

We also largely agree with the direction of travel in social security, giving just the smallest of increases to most benefits while our budget deficit remains so high. We also agree that a small real terms cut in unemployment benefit is the right direction of travel as unemployment decreases, incentivising work as a reliable route out of poverty. However, with child poverty and pensioner poverty having risen so dramatically under the Conservatives an investment of less than a percent is not good enough. Labour will ensure more resources are committed to working families with children and to our pensioners, laying the groundwork for a war against poverty. 

We support the government's attempt to privatise British Coal. At this point in time British Coal is largely loss making and shrinking as our economy moves towards cleaner energy production: that is to be embraced, and it is now time for the private sector to step in and for funds to be allocated towards public services instead. However, we do not think that we should throw coal into the private sector and be done with it: we would prefer to legislate that workers get 'first dibs' on shares and that they also get a seat at the table on company boards as part of the privatisation process. 

The rest of industry spending shows how misplaced the government's priorities are. No money - a real terms cut - is given to crucial R&D spending which spurs innovation and progress, whereas millions more is wasted on handouts for businesses and corporate welfare. Instead of the state picking winners and losers, we believe that it would have been much more efficient to reduce the tax burden on businesses and allow them to flourish in their own right so that millions could instead be allocated to the National Investment Agency.

We welcome the government's investment into the environmental agency and mirror that, though feel the investments are somewhat undermined by large handouts for oil barons. We also do not follow the government's reforms to local authority spending, which sees funding slashed in some areas to give to others. The rationale is understandable, but we believe reform to local government financing must be done in a much more largescale, radical way, not by cutting, pasting and tinkering at the edges - it must also be done in consultation with councils affected. 

Education must be the priority of any government. It's good for social justice but also good for the economy as we equip the country, especially children, with the skills they need to survive. We're clear that the Chancellor's measly 2% investment does not give education the investment it needs. Though teachers have been properly funded, which we welcome and replicate, adult education is absolutely crucial. Education should not finish once you're 16, and the government must ensure we continue to keep adults educated and trained as our economy centres around information over materials. To that extent, we'd invest the full £870 million - an unprecedented level of funding to equip this generation, nevermind the next, with the skills they need. 

That is what we offer the British people as an alternative: a more stable economy, sounder finances, smarter investment and lower taxes than the Conservatives are offering. It takes the best of Labour's values - values of social justice, of prosperity for all, of fairness and community - but applies them in a way which is fit for the modern age. It is an alternative that I believe will have us striding towards the millennium with confidence, not apologising for the disastrous government of the past few years. I am happy to present it today, and I am of course happy to take any questions. 

[Document here:]
Labour - Liverpool Riverside.
Shadow Chancellor
Daily Mirror: Ms Edwards what do you say to those who believe that this Shadow Budget marks a final betrayal of the old Labour traditions that they actually see more in the Conservative Budget? What happened to investing in our economy?

Daily Telegraph: Ms Edwards you claim that the Fire Department don't need the extra firefighters that they have requested, what makes you think that you know better than fire chiefs when it comes to fighting fires?

Independent: Ms Edwards you rather thoughtfully dissected the Conservative Party's policy on pay, but in striving for equality why did you pick the lower number and not the higher number of 2.5%?
The Mirror: Thank you for your question. I want to make it clear I know the Mirror's relationship with the Labour movement is a strong one. I know the Mirror wants the Labour Party to strive. So I speak to you on a personal and frank level: we need to lose our attachment to our 'traditions' if they're going to hold us back from implementing our values. It is a new age, with new problems that require new solutions. We tried to balance tradition with electoral success in the 1992 and it failed. If losing elections is a Labour tradition, I'll make it clear: I have no 'shame' in betraying it.

What I care about is our values. Social justice, equality, a fair start and good life chances for all. That is etched across every part of this budget: from unprecedented investment into foreign aid, from generous investments into pensions and family benefits to finally start a battle against child and pensioner poverty we so need, from over a billion into education and five billion into the NHS and more spending targets met than the Conservatives. I put those traditions to our core and champion them, but ensure they're enforceable, practical and sustainable. That is not a crime.

What I will say is after years of cuts, this budget would signify a huge turnaround from years of Thatcherism and neglect of public services. Yes, the Conservatives spend more - but when that spending is £100 million in prison places not requested or over £300 million in road maintenance not requested, that isn't investing in our economy. It's investing in waste. It's important we invest today, but make sure we can invest tomorrow too - and it's important we invest in the right things.

Daily Telegraph: Thank you for your question, and I must say it must be a strange but welcome feeling for you to be going alongside the same line of questioning as the FBU.

I am not going to insinuate for a moment I 'know better' than fire chiefs. But it's clear that these numbers were requested for them to operate in an optimum level - it was not a necessity. The Conservatives will suddenly rally in the press for firefighters now, but lets not forget they have inflicted cut after cut on the fire service despite the warnings of Fire Chiefs. Our fire service is resilient and capable - I think those cuts were wrong, but it survived. 

However, I'm not advocating for cuts. I'm advocating for sustainable investment, which is what I delivered: 500 million pounds of it, in fact. I would love to give the fire service everything it wants, but we have just come out of a recession and have been left with a significant budget deficit - we must balance sorting that mess and establishing a strong economy with investment to help those services get along so that we can invest in our fire service next year, or in the next decade. I'm not bingeing for headlines today, I'm working for a sustainable economy and sustainable public services tomorrow.

Independent: Thank you for your question. 

I must apologise, but I'm going to have to repeat a lot of similar sentiment I have already given. If I could defy the laws of economics, I would love to give all of our public sector workers a 1000% pay rise. Unfortunately, I profess I am not good enough to defy the laws of economics entirely: there are limits and consequences.

But what I can do is work within them while delivering public sector investment. I have balanced the needs of public services while keeping tax rises moderate and the deficit low. That means stable inflation, less money being thrown into debt interest and no bust to a short term boom in the future, so we can make sustained investment to pay next year, and the year after, and again. Ensuring we have tempered and moderate pay increases today ensures prosperity for our public servants tomorrow. That is what this budget promises.
Labour - Liverpool Riverside.
Shadow Chancellor
Financial Times: This Budget is far more pro-business and pro-consumer than previous Labour Shadow Budget and even the Tory Party's own Budget and yet you condemn the budget deficit as unseemly and frankly too large, where did you decide to strike the balance between tax cuts, spending rises, and deficit reduction? And why?

The Guardian: Many have called this Budget the Death of Socialism, indeed the Daily Mirror are refusing to endorse it, assuming that Labour wins the next election how will you win over these naysayers and seemingly disillusioned individuals and prevent them from crossing over to a different left-wing alternative?

The Economist: With many predicting the Tory Party's budget to raise growth up to 5 or 6% how will you ensure that the Labour Party's economic vision remains a credible alternative to the Tories'?
Financial Times: Thank you very much for your question.

I will admit getting this balance right is extremely sensitive and must be thought through with caution. We should look at the economic picture and be frank to the British people: we've seen over decades of cuts in public spending - and I will note it's curious the Conservatives believe that they can shed that image and their entire economic record overnight - which has left public services fragile. We've just come out of another devastating recession because of the Conservatives' boom and bust electioneering. We have a massive deficit in our finances that needs to be tackled not tomorrow, but today. 

I know because of this situation people watching are desperate and there's appeal to parties telling them they can have it all and there will be no consequences. That is why it is unfortunate I am the only voice calling for the government to eat its greens. But the economic picture is fragile. Growth looks strong, but we must ensure we're not just rebounding out of a recession and that growth is on its own terms and sustainable - the seeming uptick in inflation and the recommendations from the Bank of England are the first warning sign that a massive expansionary fiscal policy is not the direction we can be heading in today. If we do, more inflation and boom and bust could be the result: perhaps not next year, but within the next few. 

That means we must get to sorting out the public finances as soon as possible. To do that while ensuring public services do get some vital investment, we need to balance moderate tax rises, smart and careful - not no - investment. To fund that, Labour has ensured we reduce the tax burden on working people and increase it moderately on those most able to afford it. That is what we have done and we strongly believe it is the correct approach. 

The Guardian: Thank you,

I think the fact the Conservatives and Liberal Democrats strongly believe that throwing money at public projects to win electoral favour proves that socialist values still remain strong in the public consciousness. The British people believe in a fair start, universal public services and helping those who are most in need. But the old ways to achieve that no longer hold relevance in an increasingly global, information led economy. These traditional methods died long before I set forward this budget, and I believe in that sense The Mirror has given me too much credit.

The left much go back to the drawing board and find a new way to champion their values, and do so in a way which is practical, feasible and sustainable. This budget is a blueprint to getting that done. I have been part of the Labour movement since I was a teenager, raised in and representing a city that is a core of that movement: I won't be lectured by journalists in Islington and Conservative Party members about how left wing I am or am not. 

The next Labour government should be putting forward a radical agenda which I will happily champion. That means laying the foundation for universal childcare - liberating women and families everywhere, ending the scourge of child and pensioner poverty and taking drastic action to economically balance the United Kingdom. That is something I will promise all of you here today. But if I build that promise on debt, I won't be able to deliver on those promises sustainably. I will ensure the deficit is cleared before the millennium so that afterwards we can sustainably build on a radical programme that puts the working people of this country at the heart of our movement. 

The Economist: Thank you very much,

First of all I will make it clear I strongly believe that Labour's government will also deliver growth in this country. The Conservatives would have you believe we'd cut infrastructure spending - we'd actually invested in it by nearly 5%, which is by any definition a healthy investment. We also ensure we cut taxes in a way which would encourage strong, sustainable economic growth.

But as I mentioned before, growth is not the only measure of a healthy economy. There's inflation, the strength of a currency, employment, and many other indicators I don't want to bore even a wonkish paper such as yourself with. But rapid growth combined with an uptick of inflation can point to an economy that is overheating, which can have devastating consequences down the line - that may be in one year, in five or in ten. The Bank of England's recommendation has made it clear that as the economy is fragile coming out of recession we must not have a massive, expansionary policy. The Chancellor took heed with monetary policy, but his fiscal strategy has undermined this.

For someone who raised taxes on gamblers from 8% to 26.5%, the Chancellor is enjoying making a huge gamble himself. It might work out for his electoral chances, but I will stand by my principles and say people's savings, jobs, wages and livelihoods are not worth gambling for your personal gain, and we must continue to make that clear to the Chancellor. We will continue arguing that proceeds for growth next year - whether that be 2% of 6% - must be used to ensure the debt is paid down by the millennium, keep public services invested in and sustainably lower taxes on working people, not because it wins us elections but because it is the right thing to do.
Labour - Liverpool Riverside.
Shadow Chancellor
Okay, abridged version of this is a simple +2 XP to Edwards and an acknowledgement that the conversation has been seismically shifted by this budget. Read on for more detail.

The speech is moderate and conciliatory as far as it can be. It's difficult for you to criticise the Government when they basically nicked all of your policies from the last 15 years and wrapped it all up in an electoral bribe. The essential crux of a lot of your speech is "the Government haven't gone far enough here, and they've gone too far there". Your contrasting of the now with history was good and made the Tories look a little directionless when it came to economic policy, hence your poll lead in trust. I've already spoken at length about how this budget is something of a turnoff for your leftist mates but appeals to moderates and the speech kind of reads similarly. It's not a weak speech by any stretch and it speaks well to certain demographics and voter groups, but as always when you try and be respected rather than liked you end up annoying everyone else in the room.

The responses were difficult, I deliberately changed it up for round 2 to test your fundamentals a bit more than usual, especially as you are a woman cue gasps. Buttering up the Mirror doesn't go down so well, especially with other events going on, but when you talk about values etc. you start to bring the response back around. Your continued mis-categorisation of the 300mn for road repairs as "waste" is only successful because it wasn't really heavily focused on by the Government (as I understand it the grant is for fixing potholes but the Tories have some explaining to do on that front). The Telegraph response stunned many, requests are requests for an optimal service tempered by what they expect to get, people weren't fond of your rational for not giving them stuff (see Theresa May vs the Police) but you pull it back around again with a nice pivot onto the Government's record and continue to build respect as opposed to popularity. The answer to the Independent is well-reasoned and has the same effect.

The Budget was decent enough, it's late so I won't go into too much detail but the tax cuts are well received and the general "eat your greens" vibe is, again, respected rather than loved.

+2xp to Edwards.

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