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To win back voters shadow chancellor says party must have the ‘discipline and strength’ to tackle deepening financial crisis Shadow chancellor Ed Balls will attempt to begin restoring Labour’s credibility on the economy by promising that before the next election he will set out demanding and independently scrutinised fiscal rules for cutting the deficit. He will also tell his party conference in Liverpool that if there is any windfall from the sale of state-owned bank shares such as RBS, the cash will be used exclusively to pay down the deficit and not boost state spending. Adopting a more hawkish stance on the economy, Balls will say: “We will never have credibility unless we have the discipline and the strength to take tough decisions.” Labour is still trailing the Conservatives heavily in the polls on economic management, especially in the south, despite growing public concerns over low growth and the government’s austerity package. The tone of the speech by Balls implies an admission by Labour high command that its repeated calls for extra spending in the short term to produce growth need to be balanced more clearly by a credible emphasis on a longer-term programme to bring the deficit under control. Labour officials recognise that the party leader, Ed Miliband, must use the next few days to shift perceptions on Labour and the economy. Miliband’s pre-conference emphasis has been fixed on helping the squeezed middle, targeting energy and train prices, as well as reducing university tuition fees. But shifting the ground on to the chief electoral battleground on the economy, Balls will warn in stark terms: “The country and the whole world is facing the threat of a lost decade of economic stagnation.” He will also challenge the Tories head on over their central claim that the economic crisis is simply one of excessive public debt, and instead warn of a global growth crisis, which is deepening and becoming more dangerous by the day. In a key passage of his speech, he will embrace the two fiscal goals set out by the coalition government – bringing the country’s current budget back into balance, and ensuring the national debt is on a downward curve as a proportion of GDP. He will also promise the route to achieving these aims will be monitored by the Office for Budget Responsibility. The OBR was set up after claims that Labour politicians – including Balls – put improper political pressure on Treasury officials to produce over-optimistic forecasts. But Balls will not spell out on Monday the speed with which he would bring the deficit into balance, arguing that it is too early to give such a detailed timetable. Before the election, then-chancellor Alistair Darling promised to halve public sector net borrowing as a share of GDP over four years. He enshrined this commitment in law, but the effort to reassure the bond markets and the electorate foundered as the party went down to its worst post-war defeat. Despite some pressure from inside the shadow cabinet, Balls is not expected to offer any new apologies for Labour’s stewardship of the economy in government, such as over-spending prior to the advent of the banking crash. He has already apologised for Labour’s failure to regulate the City more effectively, and Miliband has admitted that Gordon Brown was wrong to suggest Labour had abolished boom or bust. Balls insists Labour went into the 1998 recession with a lower debt-GDP ratio than France, Germany, Italy and Japan so there is no need for further contrition. Some Labour backbenchers such as Stella Creasy are urging Balls to go further, by giving the OBR powers to tell the Treasury to change course if it is to meet its spending and deficit mandates. She has also proposed the Treasury select committee be given powers to instruct the OBR to mount specific inquiries. Neither of these proposals has been rejected by the Miliband team. Balls will try to counter claims that his commitment to growth stimulus leaves him blind to the deficit, saying “growth will not magic the deficit away”. He will say: “A steadier, more balanced medium-term plan to get the deficit down will still mean difficult decisions and tough choices in the years ahead that will face any government. Tough choices on tax and spending – like the cuts to welfare, education and Home Office budgets that we set out before the election.” He will also call for discipline in public and private sector pay. “It will not be enough to expose that David Cameron and George Osborne have got the economy badly wrong. We still know today what we recognised in 1994 – we will never have credibility unless we have the discipline and the strength to take tough decisions.” On a one-day visit to the conference David Miliband dismissed reports of tensions between the brothers: “My best advice, being in politics for 15 to 20 years, is that one year into a parliament don’t look at the opinion polls.” But the former home secretary David Blunkett urged Miliband to do more to win over the country, saying “There’s no questions whatsoever that he has to lift his profile, that we have to have seminal announcements and moments when he can reach the electorate, when he’s talking about things that really matter to people on the ground.” Labour conference 2011 Ed Balls Economic policy European debt crisis Labour Public finance Economic growth (GDP) European banks Labour conference Patrick Wintour guardian.co.uk