Ed Balls: Labour may cut benefits outside London

Labour's shadow chancellor Ed Balls. Picture: Getty
Labour's shadow chancellor Ed Balls. Picture: Getty
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SHADOW chancellor Ed Balls has indicated that a Labour government could cut welfare payments for claimants outside London.

• Balls: “Labour must start planning for a very tough inheritance in 2015”

• Shadow chancellor confirmed proposals to strip wealthy pensioners of winter fuel payments

In a major speech outlining where Labour might make savings, Mr Balls said yesterday that his party would end winter fuel payments to the rich, but also introduce regional variations on the coalition government’s controversial welfare cap.

He said the cap, £25,000 per household a year across the UK, should be higher in London but could be lower in parts of the UK where housing is cheaper.

SEE ALSO: Leader comment: Labour’s past casts a shadow over Balls

Mr Balls added that Labour wants a system that “takes account of housing costs in different parts of the country – with an independent body, like the Low Pay Commission, advising on whether the cap should be higher in high-cost housing areas like London, but potentially lower in other parts of the country”.

His comments were taken as evidence by the SNP that welfare payments in Scotland would only be safe from cuts through independence.

SNP welfare spokeswoman in Westminster Dr Eilidh Whiteford MP said: “This is an extraordinary step for Labour to take and confirms that the only way to safeguard the welfare state in Scotland is by voting Yes next September.

“Already, a majority of people in Scotland believe welfare and pensions policy should be decided by Holyrood, not Westminster.”

Mr Balls’ speech was aimed at restoring his party’s credibility on the economy by pegging its spending plans for 2015-16. He said his colleagues should expect to work within tough departmental settlements, to be unveiled this month. But he suggested capital budgets could still be increased, and floated the idea of axing several budgets south of the Border, such as 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.

“Because of 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.”

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, Mr Balls said if the economy began to recover over the next year “the balance of advantage will shift to long-term capital investment”.

He dismissed demands for the party to flesh out its spending plans now, insisting that would be “irresponsible”.

However, his former Cabinet colleague Peter Hain warned the move would raise “peanuts” and could put Britain on the “slippery slope” towards a US-style system, where public services are for the poor only.