Balls launches spoiler as talk grows of Tory giveaway Budget

Shadow Chancellor Ed Balls is running a ‘spoiler’ today against George Osborne’s 18 March Budget by warning that any electioneering tax giveaways will be more than offset by “extreme” cuts in the welfare state if the Conservatives are returned to power.

The Labour leadership is alarmed by rumours at Westminster - reported in the Sunday Times - that Osborne is planning an income tax cut for 27m voters and a so-called ‘Google tax’ crackdown on multinationals who avoid paying tax in Britain.

What has rattled Balls and Ed Miliband is that the ‘Google tax’ – more properly referred to as a ‘diverted profits tax’ - would be highly popular.

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The 25 per cent tax — five per cent higher than the usual 20 per cent corporation tax rate that kicks in in April — would be imposed on companies judged to have shifted cash overseas with the sole intention of sidestepping HM Revenue & Customs.

Osborne apparently plans to use this new revenue to pay for the raising of the income threshold at which people start paying tax to somewhere near £11,000. The threshold is already due to rise from £10,000 to £10,600 this April: if Osborne can nudge it up a bit further, perhaps by another £200 or more, the Tories hope it will answer critics who say they are only interested in making tax cuts for their rich friends.

Shadow Energy Secretary Caroline Flint, appearing on the Andrew Marr Show yesterday, sounded pretty desperate when she argued that raising the tax threshold would not help the very poorest who don’t pay taxes at all.

So it’s been left to Ed Balls to try and save the day for Labour.

Balls – a clogger when he dons a football jersey for the MPs’ football team - knows how to “get his retaliation in early”. That is what he is doing today by publishing a dossier showing where he thinks the axe will fall if Osborne and Cameron are re-elected on 7 May.

It will say that non-protected departments, such as policing and social care, face “catastrophic" and “unprecedented” cuts.

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Balls will say: "The analysis we are publishing today shows Tory plans mean spending cuts larger in the next four years than in the last five years. We are not even halfway through the cuts the Tories are planning.

"Spending cuts which are larger than any time in post-war history - a bigger fall in spending as a share of GDP in any four-year period since demobilisation at the end of the Second World War.

"Spending cuts which are larger than any other advanced economy in the world. More extreme than in this parliament, the most extreme in post-war history and the most extreme internationally."

The problem for Labour, not for the first, is: will anybody believe Balls? In 2010, he told Bloomberg News that Osborne was risking “a double dip recession" with his plan for cuts in public spending. In a speech to the City, he warned that an “economic hurricane” was heading for Britain.

So far, despite his dire warnings, economic growth is happening and, only in January, IMF boss Christine Lagarde hailed Osborne’s plan for recovery as an example to the world.