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Ed Balls reveals Labour plans to cut government deficit


Ed Balls has revealed that Labour will continue to cut costs if they win at the next general election.

The shadow chancellor said that the Labour party is serious about “balancing the books”, but claimed that they do this in a “fair way”.

The cost cutting measures include a one year extension to the current government policy on child benefits. This means that those receiving the benefit would receive less in real terms when inflation is taken into account.

Under the current government, child benefit payments will increase by a fixed rate of 1% a year until 2016, which is considerably less than the Bank of England’s target rate of inflation. However, this would be extended until 2017 under a Labour government.

Other plans that he said will be introduced include:

- The abolishment of winter fuel allowance for the richest 5% of pensioners.
- Government minister’s wages would be cut by 5% and then frozen until the deficit is completely eliminated.
- The 50% tax rate for higher earners would be reinstated.

Reducing the government deficit

At the moment, the government’s annual deficit stands at £95.5bn this year, although this is expected to fall to £75bn in the next tax year.
The government deficit is the shortfall between what the government generates in annual revenue, versus what it spends.

It has been forecast by the Independent Office for Budget Responsibility that the deficit will continue to fall over the next few years, before turning into a small surplus by the end of the 2018/19 tax year.

However, Ed Balls claimed that a Labour government would achieve this in a “fairer” way than the coalition government is planning to do.

He said that decisions will need to be made that “will not be popular with everyone”, but any cuts would be made in a way that is fair.

Balls continued to say: "At a time when the public services that pensioners rely on are under such pressure, we will stop paying the winter fuel allowance to the richest 5% of pensioners.

"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%. It will save £400m in the next Parliament. And all the savings will go towards reducing the deficit."

However, Mr Balls was accused by the conservatives of making unfunded spending commitments, whilst his plan to cut ministers wages was mocked as it would only amount to 0.003% of the deficit.

John Redwood, an MP for the Conservative party said: "I don't know whether that is the best thing to do, it's a rather small sum of money compared to the £70bn odd deficit they have got to get rid of. But I guess every little helps."

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