Labour would cap child benefit rise
Real-terms cuts in child benefit will have to continue for at least the first two years of a Labour government, Ed Balls will announce.
The shadow chancellor will present a 1% cap on rises in the help for parents as one of the "tough decisions" necessary to deal with the deficit if the party takes power next year - claiming it will save the taxpayer £400 million over five years.
He will seek to temper the squeeze by declaring that ministers' pay would be cut by 5% and then frozen until the party is able to "balance the books".
Mr Balls has sought to rebuild Labour's reputation for managing the public finances with a binding commitment to run a surplus on the current budget and get national debt back on a downward path by 2020 at the latest.
Addressing activists at the Opposition's final annual conference before the general election in May, he will vow not to "flinch from the tough decisions" needed to deal with the economy.
Under austerity measures introduced by the Conservative-Liberal Democrat coalition Government, child benefit was frozen from 2010 to this year.
It went up by 1% in April and is due to rise by the same amount in 2015/16, but Mr Balls will commit to extending below-inflation hikes for at least one more year.
"I want to see child benefit rising again in line with inflation in the next parliament," he will tell the Manchester gathering.
"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%.
"It will save £400 million in the next parliament. And all the savings will go towards reducing the deficit."
He acknowledged that failing to reverse Chancellor George Osborne's real-term cuts in child benefit would be unpalatable to many Labour voters.
"But unlike the Tories we will always ask those who have the most to make the biggest contribution," he said.
That would include reintroducing the 50p top rate of income tax for those earning more than £150,000 and another bid to show pay restraint at Westminster.
Ministers' salaries were cut by 5% when the coalition came to power and left at that level for the whole parliament, in the aftermath of the expenses scandal.
Labour is promising to repeat the exercise, slashing a further 5% from the take-home pay of its top team - reducing a cabinet minister's salary by almost £7,000 to around £127,800.
Opposition leader Ed Miliband announced yesterday that a Labour government would raise the minimum wage to £8 an hour by 2020.
"The next Labour government will get the deficit down," Mr Balls will say.
"And Ed Miliband and all my shadow cabinet colleagues are clear it will mean cuts and tough decisions and we will take the lead.
"If we win the election, on day one of the next Labour government the pay of every government minister will immediately be cut by 5%.
"Ministerial pay will then be frozen each year until we have achieved our promise to balance the nation's books.
"Because we are all clear that everybody in the next Labour government will be fully focused on that vital task of getting the deficit down."
All MPs are in line for a 10% pay rise after the election which would effectively cancel out the cut if it were accepted.
But party leaders, including Mr Miliband, are opposed to the increase proposed by the independent body set up to decide Westminster pay and perks and have signalled their intent to prevent it being implemented.
A Labour source said it was "unimaginable" that it would be taken by ministers in the present circumstances.
Mr Balls will tell the conference: "While our economy is growing again most working people are still not seeing any benefit from the recovery.
"This is our task: not to flinch from the tough decisions we must make and to show the country that there is a better way forward.
"Three years of lost growth at the start of this parliament means we will have to deal with a deficit of £75 billion - not the balanced budget George Osborne promised by 2015. And that will make the task of governing hugely difficult.
"People know we are the party of jobs, living standards and fairness for working people. But they also need to know that we will balance the books and make the sums add up and that we won't duck the difficult decisions we will face if they return us to government.
"Working people have had to balance their own books. And they are clear that the government needs to balance its books too."
Treasury Exchequer Secretary Priti Patel said: "This speech isn't a serious plan for the economy - Labour would put the deficit up, not down.
"These savings on ministerial pay only cut a minuscule fraction of the deficit - less than 1% of 1%. And it comes just days after the Institute for Fiscal Studies said Labour's economic policy means £28 billion extra borrowing.
"For all his bluster, Ed Balls still refuses to admit that Labour spent too much and he's opposed every decision we've taken to cut the deficit. All a Labour government would offer is more inefficient spending, more taxes and more debt than our children could ever hope to repay."