* Labour says Britain risks lost decade of stagnation
* Labour: Britain needs to drive demand to revive economy
* Opposition would split up banks, hit rich with more tax
* Balls says would not go on a "spending spree" in
By Guy Faulconbridge and Matt Falloon
MANCHESTER, England, Oct 1 Britain's opposition
Labour Party told the government to build its way out of
recession by using $6.5 billion from the sale of 4G mobile phone
licences to pay for new homes, but said there would be no
spending spree if it won the 2015 election.
Ed Balls, Labour's finance minister-in-waiting, says Prime
Minister David Cameron's coalition government has stalled the
$2.5 trillion economy by cutting too far too soon in an attempt
to reduce a record budget deficit rather than driving demand.
But Balls, who served as an economic adviser and minister in
the last Labour government, ruled out on Monday any pledges to
reverse specific tax rises or spending cuts implemented by the
government, instead promising a review to evaluate all spending.
"Their economic plan is failing - and they don't know what
to do," Balls told Labour's annual conference in the northern
English city of Manchester.
"In difficult times, we urgently need to put something back
into the economy," Balls told the conference where union leaders
rubbed shoulders with lawmakers among stalls selling $1,000
suits and t-shirts featuring socialist icons like Karl Marx.
Balls proposed using as much as 4 billion pounds ($6.46
billion) that 4G licences are expected to fetch to pay for more
than 100,000 cheap homes and for freezing a transaction tax on
properties worth less than 250,000 pounds, a vote winner for
young people who often struggle to buy a home.
Britain's economy is forecast by most economists polled by
Reuters to contract this year by 0.3 percent despite official
forecasts of 0.8 percent growth this year and a 2.0 percent
expansion in 2013.
Balls, one of Labour's most powerful tacticians who is known
for taunting Cameron in parliament, said the economic policy
crafted by finance minister George Osborne had crashed.
He lambasted the Conservative leader and finance minister as
"Butch Cameron and the Flat-line kid," saying they had put
Britain on course for a decade of stagnation.
Balls said Britain's economy looked like it might emerge
from recession in the third quarter because of a "short term
shot in the arm" from the London Olympics, but warned the
government lacked strategy for long-term growth.
Britain's coalition government, formed in May 2010, has
slashed spending and raised taxes in an attempt to reduce the
biggest budget deficit in British history, betting growth would
kick in to help ease the pain by the 2015 national election.
But with no growth, the Conservative Party is now at least
10 percentage points behind Labour in polls which suggest the
opposition would win power if an election were held tomorrow.
The government has also missed its own austerity targets.
"For two years they've told us all this pain will be worth
it in the end, that it'll be short-term pain for long-term
gain," Balls said.
"What we are now seeing is short-term pain already doing
long-term damage," said the 45-year-old former journalist who
was educated at Oxford and Harvard and lost a party leadership
contest to Ed Miliband in 2010.
The 2015 election will be waged on the state of the economy
but Labour strategists are concerned the Conservatives will seek
to erode its support by painting it as a high-tax party unable
to manage the world's sixth largest economy.
"There will be difficult decisions in the future from which
we will not flinch," said Balls in an attempt to project Labour
as a party of governance.
Britain's finances remain shaky: Britain's government spent
about 126 billion pounds more than it earned in 2011-12, or more
than 2,000 pounds per man, woman and child, while its deficit is
forecast by the European Union to be higher than any other EU
state bar Greece or Ireland next year.
Seeking to tap into public anger at the banks in the wake of
the global credit crisis, Labour targeted bankers and the
wealthy, arguing for an international financial transactions tax
and pledging to reverse an income tax cut for the highest paid.
Balls said he would implement a Miliband promise to split
the retail and investment operations at Britain's banks if the
coalition government watered down independent recommendations on
bank reform, due to be brought in to law before 2015.
He also said a Labour government would use the money from
selling off publicly-owned stakes in the Royal Bank of Scotland
and Lloyds - bailed out by the previous Labour administration -
to pay down Britain's national debt.