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Spending cuts set out by Mandelson

13th September 2009

Lord Mandelson will tomorrow describe his party as "wise spenders not big spenders" in a speech setting out the new economic strategy which Labour party aides believe will form the basis of the general election campaign. Defending the government's new strategy to reduce the public deficit – despite attacks from the left against suggestions of public service cuts – Mandelson will cast proposed Labour savings which preserve "frontline services" against a Conservative "ideological zeal" taking chunks from all areas.

The speech has been approved by the prime minister and chancellor and, coming within 10 days of speeches by both Gordon Brown and Alistair Darling unveiling a shift in policy, represents a settlement in the government line after months of dispute at the top of the party.

Brown had been uncomfortable about admitting that Labour may have to make any cuts at all, but aides now believe the stubbornness of Tory calls to end the fiscal stimulus gives Labour a chance to regain the upper hand on the economy ‑ but only if the party adopts a more credible line on spending. Mandelson will say that Labour should not "allow itself to be painted as the party oblivious to economic conditions" and will remind the party that it cannot "solve problems simply be throwing money at them". Looking back at high levels of investment in public services since 1999, Mandelson will also place the new economic doctrine within the party's history of social democracy.

He will say: "It would not be right to turn the remarkable and necessary period of catch-up in public service provision over which Labour has presided into some kind of eternal doctrine: that social democracy is about high growth in public spending for its own sake, against which everything else we do is secondary."

Mandelson's speech is a riposte to trade union leaders who have used the weekend ahead of their annual conference to sabre-rattle, giving a sequence of interviews damning the prime minister's leadership with faint praise, and suggesting unions might call for a change of leadership if Labour policies did not change.

In an interview published today, the joint secretary of Unite, Derek Simpson, singled out Mandelson, alongside the foreign secretary, David Miliband, and former welfare secretary James Purnell, for special attack, describing them as "thick" and "Tories", and urging Brown to move Miliband and Mandelson aside.

Alongside an increasingly bellicose union movement, rebels involved in the June move to unseat Brown are also firming up plans to run a "Gordon must go" candidate to replace Tony Lloyd as chair of the parliamentary Labour party.

The chair of the education select committee, Barry Sheerman, who ended a career of loyalty to the party high command when he called for Brown to go in June, is said by close friends to be considering putting himself forward as a candidate for the post when parliament returns after the conference season in early October and an election can be held, though this might drag on into mid-November.

Today, senior cabinet members touted as potential successors to Brown defended the prime minister's leadership. The home secretary, Alan Johnson, a long-running possible to replace Brown, told the BBC's Politics Show he believed Brown was the "absolute" best leader for the party. He said: "We cannot as a team stand in the middle of the pitch deciding who our captain should be while the other team runs rings around us. We have to unite behind our party, we have to defend our record, we have to explain our vision, we have to display our unity."

Another cabinet minister, the climate change secretary, Ed Miliband, has been singled out more recently by Derek Simpson as a "more progressive" politician than his peers. However, he dismissed notions he was the union's "Red Ed".

Making light of a suggestion he could take over from the prime minister, for whom Miliband has worked for over a decade, he joked: "Derek's on a one-man mission to destroy my political career, at many different levels.

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