Balls shows he's no "deficit denier" at the TUC

The shadow chancellor was heckled as he warned that Labour would cut too.

Those who denounce Ed Balls as Labour's "deficit-denier-in-chief" should have watched his speech to the TUC conference this morning. While the shadow chancellor made a typically persuasive case for short-term stimulus, he went on to use some of the toughest language we've heard from him on the need for spending cuts and other austerity measures to reduce the deficit in the long-term. To cries of "rubbish!" from trade union delegates (a rebuke that won't have troubled Balls in the slightest), he said:

We must be honest with the British people that under Labour, there would have been cuts, and that – on spending, pay and pensions – there will be disappointments and difficult decisions from which we will not flinch.

Balls went on to reaffirm the position he outlined in January - that Labour, based on current trends, will have to keep "all these cuts". He could not "make any commitments now that the next Labour government will be able to reverse particular tax rises or spending cuts." Unlike Nick Clegg, he quipped, "we will not make promises we cannot keep".

When challenged in the Q&A session on Labour's failure to oppose George Osborne's public sector pay freeze (and the 1% cap from 2013), Balls replied that "you can't say pay before jobs, we've got to say jobs before pay"  ("shame on you!", one delegate shouted). Asked if the party would take the railways back into public ownership (a demand that prompted the loudest cheers of the session), Balls replied that the policy would cost billions and so the answer was 'no'.  "I’m not sure when we come into government in 2015 that expenditure on that scale is going to be a priority," he said.

Balls's speech was a reminder of why the next election will, in some respects, be more difficult for Labour than the Tories. Osborne likes to say that the coalition is cleaning up "Labour's mess" but, if elected in 2015, Labour will need to clean up his. When the Chancellor delivered his "emergency Budget" in June 2010, the newly-established Office for Budget Responsibility forecast a deficit of £37bn (2.1% of GDP) for 2014-15. But the failure of Osborne's plan to deliver growth (indeed, its success in delivering recession) means that, according to the latest independent forecasts, the next government will inherit a deficit of £96.1bn (5.8%), a figure that is only likely to rise as growth remains anaemic or non-existent.

Given these fiscal constraints, the biggest choice facing Balls and Ed Miliband is whether to pledge to stick to the Tories' spending plans for the first few years, as Labour did in 1997, or to offer a distinct alternative.

Shadow chancellor Ed Balls told the TUC, "we will not make promises we cannot keep". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.