Balls plans for 'tough inheritance'
Ed Balls has pegged Labour to the coalition's spending plans for 2015-16 as he seeks to restore his party's credibility on the economy.
The shadow chancellor said his colleagues should expect to work within tough departmental settlements due to be unveiled this month.
But Mr Balls suggested capital budgets could still be increased to boost UK plc, and floated axing police commissioners, free schools and "titan" prisons to free up money for Labour priorities.
He also provoked protests from within the party and unions by confirming proposals to strip wealthy pensioners of winter fuel payments to save £100 million a year.
In a keynote speech in London's Docklands, Mr Balls said the coalition's impending spending review would be Labour's "starting point" if it won the general election.
"With the Chancellor refusing to change course, Labour must start planning now for what will be a very tough inheritance in 2015," he said. "It will require us to govern in a very different way with much less money around. We will need an iron discipline and a relentless focus on our priorities...
"Because of the overall financial situation we inherit, and the need to look ruthlessly at every pound we spend, the relentless focus of my shadow cabinet colleagues must be on how to re-prioritise money within and between budgets for current spending, rather than coming to me with proposals for any additional spending. Any changes to spending plans for 2015-16 must be fully funded, agreed with Ed Miliband and myself, and set out in advance in our manifesto."
Aides said Mr Balls was referring to day-to-day departmental budgets, and capital investment would be treated separately.
Signalling a shift away from Labour's call for a temporary VAT cut, the shadow chancellor said while that currently remained the "right prescription", if the economy began to recover over the next year "the balance of advantage will shift from temporary tax cuts to long-term capital investment".
The shadow chancellor highlighted policies that could be targeted in the party's manifesto, including whether free schools should be opened in areas where there were already too many school places, and whether the new system of police commissioners was functioning. He also resurrected the idea of police force mergers - originally proposed under Tony Blair - and suggested amalgamating government departments and agencies, and cutting the number of military top brass.