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Ed Miliband Would Slow Cuts If U.K. Economy Faltered

Sept. 29 (Bloomberg) -- Ed Miliband, the newly elected leader of the U.K.’s opposition Labour Party, said he would slow the speed at which the budget deficit is being narrowed if economic growth faltered.

Miliband said Labour’s policy of cutting the shortfall in half over four years is a “good starting point” and rejected deeper spending reductions even if the economy improved. He said the coalition government’s plan to almost close the gap by 2015 is dangerous and will harm British society.

“What the coalition is doing is extremely damaging and I think very dangerous,” Miliband told BBC Radio 4 today at Labour’s annual conference in Manchester, northwest England. “We should always proceed on the basis that we keep looking to what is happening to our economy, because if there is a big downturn, and I hope this doesn’t happen, clearly, you would need to look again at the scale and the pace of deficit reduction.”

The comments are the clearest indication yet that a future Labour administration would abandon Prime Minister David Cameron’s proposals for the deepest spending cuts since World War II. They come two days after the International Monetary Fund praised Cameron’s plans, saying their “benefits outweigh the expected costs in terms of adverse effects on near-term growth.”

Chancellor of the Exchequer George Osborne has outlined spending cuts and tax increases totaling 113 billion pounds ($179 billion) to reduce a deficit of 11 percent of economic output. Further details will be given in the government’s comprehensive spending review on Oct. 20.

Fiscal Consolidation

The Labour leader said he may reverse a previous party policy that had taxation accounting for a third of the fiscal consolidation and spending cuts accounting for two thirds.

“We should look to use more from taxation,” Miliband told Channel 4 News. “I would do more from taxation. I think we can do more.”

Miliband earlier said he wants to increase a levy on banks and keep the top 50 percent rate of income tax to “change the balance between taxation and spending.”

“There is a real threat for growth in our economy,” Miliband said. “The scale and pace of the cuts are going to have a very damaging effect on our communities throughout the country.”

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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