Labour insists only Government can heal the North-South divide

Speaking at a joint press conference with the Shadow Chancellor Ed Balls yesterday, the Labour leader said the coalition is “letting down Yorkshire” and other struggling parts of the UK because its leaders fundamentally believe that government should “get out of the way” rather than take action to help revive and re-balance the faltering economy.

Mr Balls, the MP for Morley and Outwood, renewed his attack on the Government’s decision to scrap Yorkshire Forward and the other regional development agencies, describing the move as a “major setback” for investment in the region.

With the Budget now little over a week away, the Shadow Chancellor called on the Government to reverse planned cuts to working tax credits, which he said would “ease the squeeze” on low and middle income families.

He accused George Osborne of having given the rich an effective tax cut of £1.6bn by scrapping changes to pensions relief introduced by the previous Labour Government, and said reversing this measure could help struggling families as they continue to suffer falling living standards.

But Mr Miliband made it clear he feels the Government is simply not capable of addressing the key imbalances of Britain’s economy – not least the North-South divide.

“(The coalition) is fundamentally dominated by an ideology that says the best thing government can do is get out of the way,” the Labour leader said.

“I’m afraid that is not going to solve the problems the British economy faces.

“It’s not going to solve it in the short-term, in terms of growth, and it’s not going to solve it in the medium-term, in terms of how we create the economy we need.

“That’s the fundamental tension at the heart of this Government, and that is also what is letting down Yorkshire and other regions of the country.

“Unless you understand the role of government, you are never going to be able to tackle the North-South divide and get a balanced and growing economy.”

Mr Balls echoed comments he made at the Yorkshire Post Business Club last month when he savaged the coalition for scrapping Yorkshire Forward.

“This was a big cut to industrial support for large and small businesses, replaced by a regional growth fund which has barely paid out any resources at all to businesses in our region,” the Shadow Chancellor said yesterday.

“We’ve never understood why that was seen by Vince Cable and George Osborne as being a positive contribution to regional policy. I think it’s been a major set-back to investment and support for businesses in our region, and up and down the country.”

Both men reiterated Labour’s five-point plan for the Budget, including a temporary cut in VAT and the creation of a British Investment Bank to drive infrastructure growth.

But they also called for working tax credits to be reinstated for low-income families, funded by the reversal of what Mr Balls claimed was a £1.6bn tax cut for high-earners’ pensions.

Mr Balls said he had uncovered new figures which showed Mr Osborne’s decision to change Labour cuts to pension relief had benefited those earning more than £150,000 a year to the tune of £1.6bn.

He said Labour’s original cut to pensions relief for the highest earners would have raised £4bn, but that research by the House of Commons Library showed measures to curb the pensions relief bill had cost high earners only £2.4bn instead.

“It shows just how out of touch this Government is, that with all the pressures on lower and middle income families in our country, it is the very highest earners who have benefited most from their pension tax changes,” Mr Balls said.

“This effective tax cut of £1.6bn for those earning over £150,000 is more than the £1.3bn the new 50p top rate of tax was estimated by the Treasury to raise in its first year.”

But Conservative deputy chairman Michael Fallon said Labour’s argument on pensions tax relief was based on a “completely phoney statistic”.

He said: “The Labour Government plan to raise £4bn was dismissed at the time as completely unworkable by the pensions industry, and there is no evidence that it would have raised anything like £4bn.

He was supported by Otto Thoresen, director general of the Association of British Insurers, who said Labour’s proposals were scrapped “because they were completely unworkable”, and had been “replaced with a simpler restriction that raises the same revenues.”