Miliband doesn’t want to sack Balls – he just wants to steal the Treasury’s power

The Labour leader's plans for government can factor in the prospect of having Balls as his chancellor, but in a shrunken empire.

For three stagnant years, Labour failed to convince people that the country’s economic troubles were George Osborne’s fault. Now, Ed Miliband and Ed Balls want to persuade voters that the Chancellor has cooked up the wrong sort of recovery. The strength of this argument is that optimistic headlines belie household experiences of on­going hardship. The weakness is that Labour can’t prove that things would have been any better if it had been in charge. Opinion polls suggest that many think they would have been worse.

There is also a sound argument that the growth in Britain’s economy is uneven and unsustainable. The coalition promised a nationwide, export-driven manufacturing renaissance. Instead, we have a sugar rush of cheap credit, house-price inflation and consumer spending in the south-east. Again, that doesn’t help the opposition if it can’t be proved that Ed Balls would have presided over a higher-spec recovery.

Labour’s top team affects confidence that the coalition will be punished by the majority of people who will still feel worse off in 2015 than they did in 2010. But nerves are fraying. Privately, senior shadow cabinet ministers admit that the economy could hit a “sweet spot” for Osborne in time for the general election. The Tories don’t need voters to feel jubilant about their personal circumstances as long as they sense that things are moving in the right direction and think that it still feels a bit dicey to gamble on regime change.

Miliband is running out of time to persuade people that he knows how to secure a brighter tomorrow. The urgency breeds resentment in the leader’s office of time wasted by the shadow chancellor touting his “five-point plan for jobs and growth” – the abandoned recipe for a brighter yesterday.

That isn’t the only source of frustration with Ed Balls. He is resented by the left of the party for failing to hold the line against austerity. Activists smell treason in every move to reassure less partisan voters that an incoming Labour government wouldn’t go on a spending spree. Balls has accepted a public-sector pay freeze and a cap on social security spending. He has launched a “zero-based” spending review with an instruction to shadow ministers to identify cuts in their prospective departments. He has offered to have his plans vetted by the Office for Budget Responsibility. He has pledged to run a Budget surplus by 2020.

Balls gets little credit for those vows of frugality. The Tories are good at drowning out actual Labour policy with attacks on what they want the policy to be. And the opposition sounds its media horn louder when steering to the left: restoring the 50p tax rate or controlling energy prices. It also doesn’t help that Balls lacks friends in the corner of the party that was calling for more fiscal rigour back in 2010. This is the tribe that fashions itself as “Labour modernisers” since “Blairite” has become a term of abuse.

They want Labour to say more about failures of the state as the counterpart to Miliband’s attacks on failed markets. In that context, Balls is seen as a repository of risk-averse Treasury orthodoxy; an obstacle to public-sector reform. That perception fuels suspicion of the zero-based spending review. In theory, it is pro-reform, because it invites shadow ministers to consider innovative ways to deliver services without spending more money. Yet it gives Balls a licence to meddle in every nook of Labour’s agenda. Viewed from the leader’s office, this looks like empire-building. Enough Labour people see Balls as an encumbrance to sustain a constant level of chatter about his prospects of being sacked. It is a theme loved by Tories who like to imagine his relationship with the Labour leader as a B-list sequel to the blockbuster Blair-Brown schism.

It is no secret that Balls was not Miliband’s first choice. The appointment was made in January 2011, when the Labour leader’s authority was at a low ebb. Since then, he has shored up his position, managing rival factions, co-opting Balls’s old allies where necessary. Last October’s shadow cabinet promotions of Michael Dugher to a roving Cabinet Office brief and Vernon Coaker to the Defence portfolio are widely interpreted this way. The need to signal beyond doubt which of the Eds is in charge has been a routine preoccupation in the leader’s office.

No one who has closely observed the way Miliband operates doubts his capacity to be ruthless. Shadow cabinet ministers speculate that he would get rid of Balls without hesitation if he believed it was a condition of getting over the threshold of No 10. For the time being, the calculation must be that sacrificing the party’s most experienced political economist would signal panic and allow the Tories to boast that Labour’s capitulation to the Osborne plan was complete. Even shadow ministers who don’t much like Balls say his contributions are usually the most insightful in shadow cabinet meetings.

That doesn’t mean the Labour leader trusts his shadow chancellor to run the party’s economic policy. The case that Miliband wants to make flows from his conviction that insecurity and uneven reward are hard-wired into British capitalism. He wants to “rewrite the rules” – an ambition that ranges far beyond fiscal management to cover an interventionist industrial policy, corporate governance reform and devolution of power to local level. A notable feature of that agenda is how thoroughly it would dilute the dominance of the Treasury. In other words, Miliband’s plans for government can factor in the prospect of having Balls as his chancellor, but in a shrunken empire.

It has taken three years for Miliband to win the right to decide what Labour’s economic offer should be. It has taken skilful, subtle manoeuvring. Now control of the message is his. The challenge is getting anyone beyond the party to listen.
 

Ed Miliband and Ed Balls at the Labour conference in Brighton last year. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 29 January 2014 issue of the New Statesman, The seven per cent problem

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Benn vs McDonnell: how Brexit has exposed the fight over Labour's party machine

In the wake of Brexit, should Labour MPs listen more closely to voters, or their own party members?

Two Labour MPs on primetime TV. Two prominent politicians ruling themselves out of a Labour leadership contest. But that was as far as the similarity went.

Hilary Benn was speaking hours after he resigned - or was sacked - from the Shadow Cabinet. He described Jeremy Corbyn as a "good and decent man" but not a leader.

Framing his overnight removal as a matter of conscience, Benn told the BBC's Andrew Marr: "I no longer have confidence in him [Corbyn] and I think the right thing to do would be for him to take that decision."

In Benn's view, diehard leftie pin ups do not go down well in the real world, or on the ballot papers of middle England. 

But while Benn may be drawing on a New Labour truism, this in turn rests on the assumption that voters matter more than the party members when it comes to winning elections.

That assumption was contested moments later by Shadow Chancellor John McDonnell.

Dismissive of the personal appeal of Shadow Cabinet ministers - "we can replace them" - McDonnell's message was that Labour under Corbyn had rejuvenated its electoral machine.

Pointing to success in by-elections and the London mayoral election, McDonnell warned would-be rebels: "Who is sovereign in our party? The people who are soverign are the party members. 

"I'm saying respect the party members. And in that way we can hold together and win the next election."

Indeed, nearly a year on from Corbyn's surprise election to the Labour leadership, it is worth remembering he captured nearly 60% of the 400,000 votes cast. Momentum, the grassroots organisation formed in the wake of his success, now has more than 50 branches around the country.

Come the next election, it will be these grassroots members who will knock on doors, hand out leaflets and perhaps even threaten to deselect MPs.

The question for wavering Labour MPs will be whether what they trust more - their own connection with voters, or this potentially unbiddable party machine.