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Why Balls would be a difficult shadow chancellor for David

Their disagreements over the deficit would be effortlessly exploited by the Tories.

The intermittent rumours that Ed Balls would drop out of the Labour leadership race and endorse David Miliband may have come to nothing, but relations between the two camps have improved in recent weeks.

In an interview in today's Financial Times (where he once worked), Balls points out that the pair "go back a long way" and that he knew Miliband long before he knew Tony Blair.

Yet the idea that Balls is virtually guaranteed the shadow chancellorship, should Miliband win, is wide of the mark. The piece notes:

David Miliband's supporters say they cannot see Mr Balls being made shadow chancellor, should their man win. They fear he might use the Treasury role as a chance to build an alternative power base, replicating the old Blair-Brown feud.

A potentially greater obstacle is the disagreement between Miliband and Balls over the deficit. While Miliband has defended the Brown-Darling pledge to halve the £155bn deficit by 2014, Balls has criticised the target and admitted that he privately opposed it.

He told the BBC in July:

I always accepted collective responsibility but at the time, in 2009, I thought the pace of deficit reduction through spending cuts was not deliverable, I didn't think it could have been done.

Last week he said: "Going forward, I think even halving the deficit in four years was too ambitious . . . I think to do a slower and steadier pace going forward is actually more likely to support jobs and growth, more likely to boost financial-market confidence and likely to be fairer as well."

By contrast, in his recent speech at the King Solomon Academy, Miliband declared:

I will not cede ground to the government when it comes to tackling the deficit. They are the ones in denial, not us. It is right to cut the deficit in half over four years starting next April. That would mean very difficult choices.

Given this very public difference of opinion, I'd be surprised if Miliband handed the Tories a perfect opportunity to yet again exploit the disagreements between a Labour leader and his (shadow) chancellor. One can imagine Conservative backbenchers quoting Balls's criticisms as Miliband defended Labour's deficit reduction plan from the despatch box.

Should Miliband win, Balls is more likely to be appointed shadow home secretary, a post ideally suited to his forensic mind and combative style.