Ed Miliband distances himself from tax and spending

There were echoes of the 1970s as Ed Miliband set out his election manifesto at an event in Manchester: higher taxes on banks, an end to NHS privatisation, a more generous minimum wage and a more stringent top rate of income tax.

Mr Miliband won the Labour leadership race in 2010 - with the help of the unions - by tacking to the left of his main rivals and eschewing many of the centrist tenets of "New Labour".

The unions were delighted on Monday by many of the proposals set out in the party's election pamphlet. "We welcome the sections on workers' rights and the return to putting justice back within reach of ordinary people," said Mick Whelan, general secretary of the Aslef rail union.

The Labour leader's biggest cheers came as he promised to stand up to banks and energy companies and repeated last week's promise to scrap the tax exemption for "non-doms".

Yet there was one fundamental area in which Mr Miliband sought to distance himself from his party's socialist past: tax and spending.

Speaking to a room of loyalists at the Old Granada Studios in Manchester, he referred only to higher levies on the most affluent in society - promising that there would be no increases in the basic or upper rate of income tax, national insurance or value added tax.

Meanwhile Mr Miliband made clear his determination to shed the party's profligate reputation, at the risk of antagonising his more leftwing supporters.

He said he would cut the deficit every year and aim to balance the books by the end of the decade - although that promise excludes capital spending.

That may sound like a minor caveat but it is not. "If you read the small print, independent experts like the IFS have confirmed he would run a deficit every year," said George Osborne, the Tory chancellor.

"That means more borrowing, more debt and higher taxes."

Mr Miliband insisted he would be more fiscally responsible than his most recent predecessors - Gordon Brown and Tony Blair - as he pledged to fund all promises without extra borrowing.

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Mr Miliband set out a new "Budget responsibility lock" to prevent irresponsible spending pledges.

"The very start of our manifesto is different to previous elections. It does not do what most manifestos do. It isn't a shopping list of spending policies," he said.

That heavy emphasis on fiscal responsibility was an attempt to neutralise one of the party's biggest weaknesses: the public still blame it to some degree for Britain's groaning national debts.

Critics say Mr Miliband is a late convert to austerity, having attended an anti-cuts rally early in the last parliament: Ed Balls, shadow chancellor, has done most of the running on Labour's fiscal discipline.

Michael Gove, Tory chief whip, described it as a "deathbed conversion" to responsible economics.

One of the few new promises in the manifesto was a one-year freeze in rail fares at the cost of £200m, paid for by switching spending from delaying two road projects. The document also promised to protect tax credits in the next parliament, lifting them in line with inflation from next year.

Mr Miliband has been dogged in the past by public approval ratings reminiscent of Michael Foot, who led Labour to disaster in the early 1980s.

Yet the past few weeks have seen an improvement in his popularity after two decent performances in televised election "debates".

Meanwhile, Labour has pulled ahead of the Tories to a lead of 2.3 percentage points, according to the Financial Times poll of polls.

"I'm ready, I'm ready, I'm ready," Mr Miliband said, in an assured performance that won plaudits from some unconventional quarters. Tony Gallagher, deputy editor of the usually critical Daily Mail, described the speech as "relaxed, funny, confident".

Labour's morale has improved in the past fortnight despite the looming threat from the Scottish National party.

<>One senior Labour aide said: "The Tories still have the media and the money and we are the underdogs, but we may now have the momentum."

The Conservatives, who usually poll far ahead of Labour on "economic competence", have put that advantage at risk in recent days by promising multiple giveaways.

Mr Miliband said these Tory pledges added up to £20bn of uncosted promises: in lower taxes, a further £8bn for the NHS and a five-year freeze in rail fares. They amounted to a sign of "desperation and panic", he said.

"You can't fund the NHS with an IOU" he said. "Every promise we make is paid for, that is the difference between the Conservative party and the Labour party."

The Tories have a challenge to fund their new promises because their fiscal targets for the next Parliament are tougher than Labour's: they have committed to £25bn of spending cuts to eliminate the current structural deficit by 2017-18.

Labour's more modest aim is to get national debt falling and a surplus on the current budget by the end of the next parliament.

Asked precisely how he would achieve this target, Mr Miliband failed to flesh out any more details, saying an "arbitrary timetable" was not the answer.

"George Osborne has done that many, many times," he said. "He said he was going to get rid of the deficit and he has failed to do so."

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