Miliband should sack Ed Balls

Labour cannot hope to rebuild its economic credibility while Balls remains shadow chancellor.

In his upcoming reshuffle, Ed Miliband should replace Ed Balls as shadow chancellor.

The Labour party is currently becalmed, and with it Miliband's leadership. In the 12 months since he replaced Gordon Brown, Labour's poll rating has risen one per cent according to the most recent Populous poll, two points according to MORI. Despite riots, war and economic stagnation Labour's leader cannot break beyond the margin of error.

Those wondering whether phone hacking would be a game changer have their answer. It has changed nothing. Despite his deft response to the crisis almost half of Labour supporters cannot picture Ed Miliband as prime minister, and his general approval ratings are plumbing new depths.

But it's not only Ed Miliband the polling furies have chosen to mock. Unemployment is rising. Business confidence declining. Growth estimates are being frantically revised down. Yet unbelievably, the Conservative party has now opened up a ten point lead over Labour on the issue of who has the best economic policies for the country. Even more staggering, their lead has actually increased since March. The worst things get for the economy, the better things seem to get for George Osborne and his party.

There is a simple reason for this paradox. Labour's own economic policy has no clothes. The deficit is the defining issue in British politics. And Tory attempts to brand Labour as deficit deniers have succeeded beyond their wildest dreams. In fact, they have not so much branded shadow ministers as embalmed them, placed them in a glass case and erected a sign "Deficit Denier, official exhibit, 2010 - present".

No one within the Labour party is prepared to even glance at, never mind acknowledge, this elephant in the shadow cabinet room. Nor are they prepared to acknowledge the even larger elephant balancing upon its shoulders. The person who must take responsibility for this parlous state of affairs is Ed Balls.

Labour's shadow chancellor is one of the few political heavyweights on the front bench. But in this specific brief he is an albatross around his party's neck. All the opinion polls indicate the public blames the economic policies of the previous Labour government for the cuts to thier services, along with the hardship they are experiencing, more than the coalition. And Ed Balls is the individual in the shadow cabinet more closely associated with those policies than any other.

Ed Miliband is acutely aware of the toxic legacy of the Brown premiership. Hence his reluctance to even raise the issue of the economy in the wake of the publication of the Darling memoirs. But if he is wary of discussing economics when David Cameron has a copy of Back from the Brinksitting on his lap, how can he hope to make a case whilst he has Ed Balls sitting on his own?

Nor is this just an issue of legacy. Ed Balls was instrumental in rebuilding Labour's economic credibility from the rubble of the 1992 election defeat. He did it by adhering to a simple golden rule. If Labour couldn't ditch their tax and spend image they were unelectable. Prudence became the watch word. Shadow ministers were banned form making any commitments on spending. Gordon Brown, at Ball's urging, pledged to stick to Tory spending limits, and did so even after Labour's landslide 1997 election victory.

Yet as shadow chancellor Ed Balls seems intent on unlearning every rule he once imposed with iron, and occasionally brutal, discipline on others. Labour's policy has not just regressed to tax and spend. It's now cut tax and spend. New expenditure commitments are tossed around like confetti. Tax cuts bounced out with no internal consultation. Prudence has been ditched, replaced by that leather clad vixen, Ms Pump Primer.

What is Ed Balls thinking? It's not just that he's trying to get the voters to embrace an economic agenda they rejected decisively at the 2010 election. They're being asked to endorse economic policies they rejected at the 1979 election. The perception of fiscal profligacy isn't a dead end for the Labour party. It's political hemlock. We know this because Ed Balls told us it was. And he was right.

Labour's economic policy is no longer grounded in political reality, but in a combination of misguided loyalty, stubbornness and Keynesian economic orthodoxy. Ed Balls seems to believe distancing himself from the policies of Gordon Brown would represent a form of betrayal. It would not. It's just the price of doing business for a new party of opposition. He also seems to equate dogma with strength. Yet by sticking unflinchingly to the failed strategy of a failed manifesto he is reinforcing every negative stereotype his enemies have ever sought to construct around him. "The reckless thing to do is plough on regardless", he told Tribune this week. Too right.

Ed Balls is shadow chancellor. His is not chancellor. His prescriptions for the nation's ills may be economically sound. But they are politically unsustainable. Saying 'I was right, you were wrong' to your political opponents, is one thing. Saying it to the voters is a different matter entirely.

He seems unable, or unwilling, to acknowledge this. A destructive combination of loyalty, stubbornness and pride have locked him into a strategy from which he cannot escape. Which is why, at the next shadow cabinet reshuffle, Ed Miliband needs to set Ed Balls and his party free.

Photo: Getty
Show Hide image

Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.