Responding to Ed Balls’ speech at the Labour Party conference in Brighton, where he pledged to increase the bank levy by £800m to fund free childcare, the editorial and programme director of thinktank The Institute of Economic Affairs, said the shadow chancellor had forgotten the original purpose of the levy.
He said: “Increasing the banking levy for the purpose of funding new spending commitments will reduce bank lending to both businesses and households. This could severely damage the economy.
“The banking levy was designed to compensate taxpayers for costs imposed on government when banks fail. It should be temporary and not be used to finance new spending programmes.”
Mr Balls’ speech railed against the Tory-led coalition’s handling of the economy and claimed David Cameron had “diminished Britain”, and claimed that Labour had “learned from the past”.
At a conference where the opposition has begun introducing potential 2015 election manifesto points, the MP for Morley and Outwood said Labour would ask the independent Office for Budget Responsibility to audit its election proposals.
Other key policies included the building of 400,000 affordable homes in the two years following an election victory in 2015 (later reinforced by Labour leader Ed Miliband’s pledge to build 200,000 homes a year until 2020), the introduction of a £2m “mansion tax”, and the abolition of pension tax relief and the winter fuel allowance for the richest pensioners.
He also suggested a Labour government would look to pool the social care and health service budgets to deliver better value for the taxpayer.
However, Rod Wadham, principal of North Yorkshire-based Wadham Financial Solutions, said the proposal of pooling budgets would not be “not practical” and would increase the financial pressure on the NHS.
He said: “I can’t see how government spending will meet the cost need of long-term care over the next few years. It is more important to raise awareness on how people can self-fund.”