Mandelson advocates 'wise spending'

Business Secretary Lord Mandelson sought to regain the initiative for Labour on public spending today by promising that the Government would reduce Britain's debts by being "wise spenders", while the Conservatives would impose "savage" cuts on services.

In a speech to the Blairite think tank Progress this morning, Lord Mandelson said the Government recognised the need to "prioritise and economise" once Britain emerges from recession, but would do so while protecting frontline services.

By contrast, he said, the Conservatives were "foaming at the mouth with excitement" at the prospect of spending less on public services like the NHS and schools.

Lord Mandelson insisted that it was too early to start reducing the £175 billion deficit now, warning that Tory plans to rein in spending immediately risked "triggering an economic relapse" before Britain has recovered from recession.

"While the freefall in the economy may have been brought to an end, the effects of the recession are not yet behind us," he warned.

"This is why maintaining Government spending and investment is vital."

In an interview with the BBC Radio 4 Today programme this morning, Lord Mandelson acknowledged that major Government projects would have to be put on the "back burner" as part of the effort to balance the nation's books.

And he appeared to indicate that flagship projects including the ID card scheme and the replacement for the Trident nuclear deterrent would also come under scrutiny.

Asked if the multibillion-pound projects would be protected, the Business Secretary replied: "They have not been discussed collectively by ministers... but if you are saying to me that we are going to rule out things in advance of our consideration of these matters, I would say it would be foolish to rule out anything."

Downing Street later said that Lord Mandelson was talking only in "generic terms" and that there was no review under way into either Trident or ID cards.

Lord Mandelson's intervention reflects an agreement between himself, Prime Minister Gordon Brown and Chancellor Alistair Darling to abandon the idea that curbs can be avoided.

Polls have indicated that voters are more in tune with the hawkish line coming from the Conservatives - who have claimed the dire state of the nation's finances means immediate cuts are necessary.

Instead, Lord Mandelson used today's speech to say that the Government will maintain spending levels until the recession is over and then protect frontline services.

Economic circumstances require active state investment in growth for the future as well as "a responsible plan for paying down debt without eating into the fabric of people's lives", he said.

Labour must not "lose our nerve" in the face of the high borrowing which the Chancellor has had to take on in response to the recession.

"Government must actively invest in the economic growth of the future," said Lord Mandelson.

"It is growth that will be the biggest antidote to debt and will determine how far and fast we are able to pay it down in the future.

"We need continued Government action if we are to create the right competitive conditions for the UK economy to generate future jobs."

Lord Mandelson said Mr Brown accepted that there would have to be "tough choices" in order to meet the Chancellor's plan to halve the deficit over four years once the recession is over.

But he said the Tories were wrong to suggest that this must mean "deep, savage, indiscriminate across-the-board spending cuts whoever is in power".

"The choices Labour makes will aim to sustain our investment in the nation's priorities - an approach of 'frontline first'," said Lord Mandelson.

"Our top priority will be to protect essential services and activities on which the vast majority of people who, for example, cannot afford private education and private healthcare depend.

"The public can be assured that Labour's approach will be based on clear values and principles, in order to ensure social fairness, promote social mobility, and find the cash for productive social investments in the nation's future."

And he added: "Our 1997 manifesto described the New Labour approach as being 'wise spenders, not big spenders'. This is and remains a core New Labour principle.

"We do not believe that we should try to solve problems simply by throwing money at them. We need to be 'effective state' social democrats, not 'big state' social democrats."

By contrast, the Conservatives approached the prospect of public spending cuts with "thinly disguised zeal", he said.

Accusing the Tories of abandoning much of the "modernising rhetoric" of David Cameron's early months as leader, Lord Mandelson said their response to recession had seen the Conservatives returning to their "entrenched instincts".

Mr Cameron and Shadow Chancellor George Osborne had been "left floundering" by the downturn, opposing fiscal stimulus measures in a way which would have made the recession "deeper and longer", said Lord Mandelson.

And the Tory call for spending cuts now left them isolated among G20 nations and would "risk triggering an economic relapse and make the problem of tackling the deficit and bringing the debt down in the medium term more difficult, not less", he said.

In pursuit of a Thatcherite "small state" agenda, the Conservatives would ditch reform of the public services in favour of cuts, claimed the Business Secretary.

"If we have learnt anything in this recession, it is that everyone needs the security of strong public services and active government, not just the poorest," he said.

"The Tory approach to public services is a direct threat to middle Britain and the services on which families rely.

"The consequences would be savage. That is why the Tories want to sugar the pill.

"An unspoken Faustian pact is on offer. The Tories will spend less on public services. But in return less will be expected of public services. Less will be required of those who work in public services. Less spending, less real reform is what the Tories offer."

Repeating his description of Labour as "the underdogs", Lord Mandelson called on the party to approach the General Election expected next spring "with the mindset of insurgents who are restless with the status quo, not incumbents".

And he added: "There is much at stake. There is a real choice to be had between the progressive reform offered by Labour and the ideologically-driven retrenchment and deep cuts offered by the Tories.

"Between policies to achieve economic growth, and the Tories' abandonment of these in favour of 'free markets'.

"And between Labour's priority of middle Britain and people's needs for accountable public services, and the Tories' desire to cut taxes for the wealthy few."

In a question-and-answer session following the speech, Lord Mandelson said Labour "couldn't have been more honest and more forthright", particularly in respect to its plans on taxation.

He added: "I think that the priority will be the scope that we can make to switch spending to find cost savings and efficiencies by changing the content and the shape and timing of public expenditure over a headlong rush to raise loopholes in tax."

Asked about car workers' jobs at Vauxhall, he said: "I believe the deal that has been made between General Motors and Magna International will enable both our plants at Ellesmere Port and Luton to remain open, certainly for the foreseeable future.

"I say the foreseeable future because, as everyone knows, there is over-production, over-supply and over-capacity in the car manufacturing industry right across Europe, right across the world.

"I have always been honest that changes are coming to this industry, but on the other hand these are plants which are highly skilled, highly efficient, highly productive and, therefore, if we are looking to a business plan from GM and Magna that puts that efficiency first and viability and commercial interest of these new companies are uppermost, then I believe that both of those plants will be safe in the future."

Lord Mandelson warned that the outcome of the next General Election was not a "foregone conclusion".

"The next election is going to be a battle, there's going to be a very important electoral battleground to be fought," he said.

He said the campaign would be fought over "the really big changes" Britain was facing on the economy, on society, the environment and the political system.

He added: "Let's elevate this debate and let's ask the media to focus on everyone's policies, everyone's positions, to give scrutiny not just to the Government... let's give scrutiny to the Conservative and the Liberal Democrats' policies as well."