Former foreign secretary challenges shadow chancellor by reframing Labour's economic policy
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David Miliband told MPs that the last Labour government had made mistakes. Photograph: Wpa Pool/Getty Images
Has David Miliband just delivered one of his most significant speeches since his brother defeated him in the 2010 Labour leadership contest?
The initial headlines on his speech on the welfare bill have focused on his attack on the government after he described the measure as "rancid".
But this misses the most significant aspect of his speech – an apparent attempt to reframe Labour's economic policy which is being run by his great rival Ed Balls.
The former foreign secretary told MPs he accepted the government's "envelope" in a key part of the public finances – a line Balls has yet to cross. *Miliband said the debate should not focus on affordability but about priorities within the "envelope" of "all benefits, all tax credits and all tax relief for the next few years".
Miliband was in agreement with Balls over priorities as he criticised the government for slashing benefits for the poor while offering tax cuts for the rich. But accepting the "envelope" does not tally with the approach of the shadow chancellor. Balls wants to lambast the government over the next two years by saying that they have sucked demand out of the economy by cutting spending too far and too fast. On the eve of the election he is likely to pull off a trick in the mould of Gordon Brown by saying that the economy is in such a dire state he has no choice but to accept the government's overall spending "envelope" – though not the exact headings – for 2015-16.
The Balls approach is attacked regularly in private by supporters of Tony Blair on the grounds that Labour is failing to revive its economic credibility by acknowledging fully and frankly the level of the deficit and the need for serious cuts. There is even speculation that Alistair Darling, whose plan to halve the deficit over four years was criticised by Balls for going too far and too fast, could be summoned back to replace him.
And then David Miliband enters the fray by suggesting, effectively, that Balls should bring forward his Gordon Brown trick. Miliband made two other key points that will be examined with care by members of the shadow cabinet:
• George Osborne's description of people "asleep, living a life on benefits" marked a return to the "dividing lines" approach of politics. Balls and Brown were practitioners of this particular art form.
• Labour should be prepared to admit it made mistakes.
* This is Miliband's quote on the "envelope":
The government claim that the alternative to this bill is higher borrowing or higher taxation, but I want to show why that is not true. The government themselves have projected the total cost of all benefits, all tax credits and all tax relief for the next few years, and I am happy to debate priorities within that envelope. I will take the envelope that they have set. But let's have a proper debate about choices, not the total sum – a priorities debate, not an affordability debate.
The version of Miliband's speech on his website misses the crucial words:
I will take the envelope that they have set.