Cormac Hollingsworth reports on shadow chancellor Ed Balls’s op ed in today’s Times.
While acknowledging that, at this moment of economic high uncertainty, he’s not getting the economic credibility that sticking to his guns and being proved right might have deserved, Ed Balls today repeats for those who weren’t listening, the spending commitments he made at the Labour party conference.
Back in Liverpool, he said:
“First, before the next election – and based on the circumstances we face – we will set out for our manifesto tough fiscal rules that the next Labour government will have to stick to – to get out country’s current budget back to balance and national debt on a downward path.
“And these fiscal rules will be independently monitored by the Office for Budget Responsibility.”
The repeating of these important commitments are the centre of the shadow chancellor’s op ed in today’s Times (£) – but the circumstances have changed dramatically since that September speech in two ways.
First, now we know Ed Balls was right, and the government’s austerity policy has forced borrowing £158 billion higher.
“A jarring setback for the government” is Balls’s description of the news today, and he diagnoses the cause of the problem is the government “being forced to borrow billions more – to pay the price of slow growth, increasing job losses and a bigger benefits bill”.
With an admission that his plan may be good economics, to say it currently is “bad politics” may be a little harsh, but it certainly does appear to be slightly “out of tune” with the public mood. However, rightly undeterred, he begins to engage with the persuasion that Labour needs to engage with on the politics of the difference between spending and borrowing.
As he says:
“Conservative ministers scoffing, Labour’s proposal is to borrow even more.”
Balls needs to convince that preventative spending and investment does not result always in higher borrowing.
And it’s here we see the argument these many stories will need to be printed out for his party’s activists to use on doorsteps, and deployed on wavering Liberal Democrat MPs:
“On the surface of things cutting, EMAs and the Future Jobs Fund saved money and reduced borrowing.
“But how much more will it cost our society and economy to leave those young people unemployed and unproductive receiving benefits rather than contributing to the national wealth.
“The argument is whether it is better to be borrowing billions more to keep people out of work on benefits or whether action now to get our economy moving will get more people into work paying tax and help to get the deficit down in a fairer way.”
In my view, it would not only fair, it would do it quicker
But there is a second circumstance that has changed since Liverpool that is missing from this piece, and that is the explosion of a new credit crunch. In Liverpool, Balls referred to the “aftermath of a worldwide financial and banking crash”. He does mention it here today as well, again apologising for “the biggest financial crisis since the 1930s [that] happened on the previous Labour government’s watch”.
I hope it remains the biggest financial crisis but it’s now too early to tell. After a year of no growth, bank share prices close to their 2009 low there’s every indication this crunch could be worse for our economy.
Surely after 18 months, the coalition can be held to account for not making our financial system safer?
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• Economic update, December 2011 – UK teeters on brink of recession – Tony Dolphin, December 5th 2011
• “In the black Labour” nails its colours to the OBR – the OBR that keeps on getting it wrong – Cormac Hollingsworth, December 2nd 2011
• OBR confirm Osborne will borrow more than the Darling projection – Daniel Elton, November 29th 2011
• Krugman: Coalition is “bleeding” Britain dry – Alex Hern, December 1st 2011
• Balls’s speech gives Labour a solid economic foundation – Cormac Hollingsworth, September 26th 2011