20/03/2012 19:13 GMT | Updated 20/05/2012 06:12 BST

George Osborne Should Use This Budget to Correct His Mistakes

Ed Miliband, Ed Balls and I have set two tests for George Osborne's budget today. First, will it get our economy moving - delivering the jobs and growth we need to get the deficit down? And second, will it be fair to families on low and middle incomes now bearing the heaviest burden of Osborne's spending cuts and tax rises?

We need a plan for jobs and growth because the Chancellor's decision to cut too far and too fast has backfired. The government's complacency about the ability of the private sector to fill the gaping void left by public sector cuts has meant a flatlining economy and opportunities for recovery squandered.

Stalling growth and rising unemployment means weaker tax receipts and a growing benefits bill - so Osborne is now on course to borrow £158 billion more than he said he would, meaning more tax rises and spending cuts, and extending his deficit reduction timetable two years into the next parliament.

And far from ensuring that the costs of his economic failure are borne by those with the broadest shoulders, Osborne has loaded the heaviest burden onto working families with children, with those on middle and low incomes suffering the most. The squeeze is set to continue this year - analysis by the Institute for Fiscal Studies (IFS) shows that families with children will be, on average, £530 worse off as a result of changes due to come into force next month.

George Osborne should use this Budget to correct his mistakes and rectify these injustices.

To help hard-pressed households and get our economy moving again, we favour a temporary VAT cut, which would be worth £450 to the average family with children at the same time as cancelling the effect of the increase in fuel duty planned for August this year. Increasing the personal tax allowance would be better than doing nothing - but as the IFS confirmed last week, this wouldn't help pensioners or those on the lowest incomes.

We'd also bring forward new infrastructure investment, which could create jobs now, boost the beleaguered construction industry, as well as laying the foundations for our economic future. But the steps taken so far by government to get work on these vital projects underway amount to far too little, far too late.

Other measures to boost jobs and growth include a further cut in VAT to 5% on home repairs, improvements and maintenance and a national insurance holiday for small firms taking on extra workers. And with bank bonuses still high we should repeat Labour's bank bonus tax to fund the building of 25,000 new affordable homes and the creation of 100,000 new jobs for young people.

While a plan for jobs is vital to get the deficit down, so are tough choices on tax, spending and pay. We can't duck that reality. But that means our values and priorities matter all the more. We want the Chancellor to do more to help families currently bearing an unfair share of the burden.

So we say he should reverse cuts to tax credits next month, and cancel planned changes to rules on working hours that would leave some low paid couples with children better off quitting work. These changes could be paid for by a clampdown on the avoidance of stamp duty on properties worth over £1 million, and by reversing a pension tax relief boost the Chancellor has given to people on incomes of more than £150,000.

We are also calling for an urgent rethink of changes to child benefit due to come in next January that would mean a single mum, or family where mum or dad stays at home, on £43,000 would lose all their child benefit, while a dual earner household on £84,000 could keep all of theirs.

We've said we'll support the Chancellor on a mansion tax if its purpose is to ease the squeeze on low and middle incomes. And we have been consistent in calling for tougher action to reduce tax evasion and avoidance. But a tax cut for the top 1% on incomes of £150,000 a year cannot be the priority when small businesses are struggling, living standards for the majority are falling, and the number of young people unemployed is still rising.

In tough times like these we need to prioritise jobs, growth, and fairness for families - those are Labour's priorities, and I believe they are also the priorities of the British people.