Labour promises audit in bid for economic credibility

By William James

BRIGHTON, England (Reuters) - The Labour party will on Monday promise an independent audit of its spending pledges in an attempt to convince sceptical voters ahead of the 2015 election that it can be trusted to run the economy.

Ed Balls, the man who could be Chancellor if Labour win the election, will argue that despite signs of a recovery Prime Minister David Cameron's government is squeezing millions of voters because prices are rising faster than wages.

By focusing on the cost of living, Balls hopes to shift the debate over Britain's economic policy after three years of arguing that Chancellor George Osborne's attempts to cut the budget deficit would kill off a recovery.

Labour is also keen to deflect criticism from the ruling Conservatives, who say the 1997-2010 Labour governments brought Britain to the edge of financial ruin by borrowing too much.

"In tough times it's even more important that all our policies and commitments are properly costed and funded," extracts of Balls' speech released to the media said. "The British people rightly want to know that the sums add up."

A YouGov poll for the Sunday Times newspaper found 30 percent of voters trust the Conservatives on the economy, compared to 21 percent for Labour.

With Labour's credibility damaged by the budget deficit it ran up between 1997 and 2010 - which peaked at Britain's largest-ever peacetime overspend of 11.2 percent - Balls took the unprecedented step of inviting an independent budget watchdog to examine Labour's election pledges.

Balls extended the invitation in a letter to Robert Chote, chairman of the Office for Budget Responsibility - a body set up by the Conservatives' Osborne, with a mandate to provide forecasts free of political influence.

The announcement comes after a Conservative party paper, citing research by the finance ministry, said Labour's already-announced election pledges would require Britain to borrow an additional 28 billion pounds.

FLAWED RECOVERY

Recent data showing Britain is on track for annual growth of 1.4 percent, the strongest since Labour lost power in 2010, has boosted the Conservatives and narrowed Labour's lead in the polls ahead of a 2015 election.

Osborne has cautiously touted the upturn as a vindication of his policies, saying earlier this month that Britain's economy had turned a corner.

But Balls, a key figure in the previous Labour-run finance ministry and close ally of former Prime Minister Gordon Brown, sought to play down the political capital linked to the rebound.

"Now even as growth finally returns, with prices still rising faster than wages, with business investment still weak, with unemployment still rising in half the country, with bank lending to business still falling, we can't be satisfied," Balls will tell party members gathered in the resort town of Brighton.

A fierce critic of Osborne's spending cuts, Balls said Labour would have to stick to the 2015/16 spending totals set out by the current coalition and "govern with less money around", but promised to seek out savings that could be used to boost spending elsewhere.

"Delivering our Labour goals will be harder than at any time in living memory," he said. "But it can be done - if we get people back to work and strengthen our economy, cut out waste and focus relentlessly on our priorities."

(Editing by Andrew Heavens)