Ed Balls and Peter Mandelson find common ground on Europe

The Shadow Chancellor and former Business Secretary agree on how coalition policy is failing and wha

There is much chatter in Westminster today about an op-ed in today’s Guardian jointly penned by Ed Balls and Peter Mandelson. 

Predictably, the content of the article – arguing for a more balanced European economic agenda to stimulate growth in parallel with fiscal responsibility – attracted far less comment than the fact that its authors represent an unusual coupling. The two famously disagreed about Briatin’s prospects for euro entry when it was on the agenda in Tony Blair’s first term in government. More generally, they occupied opposing trenches for most of the long Blair-Brown civil war.

They have, it seems, patched up their differences for at least long enough to agree a position on European policy and even to share a platform at a conference this afternoon. The two Labour bigwigs sat alongside European Competition Commissioner Joaguin Almunia and former CBI Director General Richard Lambert on a discussion panel at an event hosted by the Centre for European Reform.

Predictably, Balls was asked at one point if he agreed with Lord Mandelson on the proposition (set out by the former European trade commissioner in a lecture last week) that Britain was heading for a referendum on its membership of a newly configured European Union. The shadow chancellor conceded that such an outcome might indeed by inevitable, but insisted it was not a matter of policy urgency for now. He then turned the question around to attack the government and the Tories for being unable to engage effectively in EU affairs. Ministerial fear of fanatical euroscpticism on the back benches is, said Balls, damaging British interests: “I don’t remember a time when British political leaders were less influential on decisions that have such a big impact.” David Cameron’s decision to walk away from a Brussels summit last December – the famous veto of a pan-EU fiscal stability treaty – was “catastrophic short-termism.”

Mandelson agreed, adding with more than a hint of mischief, that the government was, he believed, much more engaged and pro-European in private talks than it dared let on in public. He suggested the coalition’s real European policy was being conducted “privately, almost secretly.”

Perhaps just as interesting from a policy point of view, Ed Balls, in the discussion of how the eurozone ought to evolve in response to the current crisis, backed the idea of a unified single currency bond. He said: “There must be mutualisation of debt obligations” – which effectively means a eurobond and, by extension, a much more substantial level of financial integration among euro member states. I’m not sure the shadow chancellor has come out so explicitly on this issue before.

Also, even deeper into EU Kremlinology: Almunia was extraordinarily vocal in his criticism of the way the political process of eurozone crisis management turned into a bilateral negotiation between German Chancellor Angela Merkel and Nicolas Sarkozy. The Commissioner referred to this as a “duopoly” and expressed the hope that the next stage of the crisis might be characterised by a “return to intergovernmental” ways of doing things. This might not sound like much, but in terms of Brussels protocol it is pretty unusual for a Commissioner to slam national heads of government so explicitly. There is clearly a lot of relief on the Commission that the “Merkozy” alliance has been disbanded. 

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

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.