Balls has got the Tories on the run

The energetic shadow chancellor is challenging the coalition's missteps at every turn.

The battle over the appropriateness of the coalition's economic policy has truly commenced and the amateurs are no longer dominating. A professional economist has arrived on the scene in the form of the shadow chancellor, Ed Balls, whose energetic interventions, as I suspected they would, are beginning to put coalition ministers on the back foot. Ed is highly effective and is challenging the coalition's missteps at every turn. His alternative strategy is to cut the deficit more slowly and not to compromise growth.

The shadow chancellor's Budget broadcast seemed particularly on point and contained a big apology. Balls agreed that regulation should have been tougher but: "Every government in the world got that wrong -- and I'd like to say sorry for the part that I and the last Labour government played in that." And he rightly pointed out that the Tories are not innocent, as they continually argued for even lighter regulation.

Ed had several sound bites that will surely have some resonance with the general public. "Our economy, which was working, has now ground to a halt." "By cutting too far and too fast, George Osborne isn't solving the problem -- he is in danger of making it worse." "But George Osborne is going too far and too fast and we're paying the price in lost jobs and slower growth." "So I fear that George Osborne's plan won't just hurt, it won't work." This counterattack seems to be working: at PMQs last week, an obviously rattled David Cameron snapped angrily that Balls is "the most annoying person in modern politics". Ed is obviously getting to the Prime Minister. Good. That means our shadow chancellor is doing his job.

Of particular interest are the claims made by Chancellor Osborne that the OECD is a big fan of his policies. He even referred to a letter he received from the right-wing boss of the OECD, Angel Gurria, in which he said that "while this budget contains hard measures, we are convinced that they are unavoidable in the short term to pave the way for a stronger recovery. By sticking to the fiscal consolidation plan set out last year, the United Kingdom will continue along the road towards stability."

Interestingly, today, in its interim assessment of the G7 economies, the OECD made clear that it thinks that the UK economy will grow more slowly than any other G7 economy except Japan, which has just been hit by tempest and flood. The OECD also revised their forecast for Q2 2011 from 1.3 per cemt to 1 per cent on an annualised basis. At the same time, it upgraded its forecasts for many G7 economies, predicting second-quarter growth in the US, France and Germany of 3.4 per cent, 2.8 per cent and 2.3 per cent, respectively. If the policies are so great, how come the OECD lowered their forecast for growth in the UK but raised it in all the other OECD countries that are not implementing austerity? I suspect Ed may well be picking up on this rather glaring contradiction.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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The trouble with a second Brexit referendum

A new vote risks coming too soon for Remainers. But there is an alternative. 

In any given week, a senior political figure will call for a second Brexit referendum (the most recent being David Miliband). It's not hard to see why. EU withdrawal risks proving an act of political and economic self-harm and Leave's victory was narrow (52-48). Had Remain won by a similar margin, the Brexiteers would have immediately demanded a re-run. 

But the obstacles to another vote are significant. Though only 52 per cent backed Brexit, a far larger number (c. 65 per cent) believe the result should be respected. No major party currently supports a second referendum and time is short.

Even if Remainers succeed in securing a vote, it risks being lost. As Theresa May learned to her cost, electorates have a habit of punishing those who force them to polls. "It would simply be too risky," a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result. Were a second referendum lost, any hope of blocking Brexit, or even softening it, would be ended. 

The vote, as some Remainers note, would also come at the wrong moment. By 2018/19, the UK will, at best, have finalised its divorce terms. A new trade agreement with the EU will take far longer to conclude. Thus, the Brexiteers would be free to paint a false picture of the UK's future relationship. "It would be another half-baked, ill-informed campaign," a Labour MP told me. 

For this reason, as I write in my column this week, an increasing number of Remainers are attracted to an alternative strategy. After a lengthy transition, they argue, voters should be offered a choice between a new EU trade deal and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be a distant memory. The proviso, they add, is that the EU would have to allow the UK re-entry on its existing membership terms (rather than ending its opt-outs from the euro and the border-free Schengen Area). 

Rather than publicly proposing this plan, MPs are wisely keeping their counsel. As they know, those who hope to overturn the Brexit result must first be seen to respect it. 

George Eaton is political editor of the New Statesman.