Round one to Ed Balls

Balls’s calm and assured response was exactly what Labour needed.

Ed Balls wisely resisted the temptation to boast that he had been vindicated by today's terrible growth figures. Instead, in an appearance on The World At One, he calmly offered himself as the voice of experience to an economic novice.

"I worked at the Treasury for ten years. My advice to George Osborne is: don't think up excuses about the weather, don't dig yourself into a hole," he said. Quoting Keynes, he added: "If the facts change, I change my mind. George Osborne should do that."

The shadow chancellor sensibly pointed to the fact that the deficit for 2009-2010 came in at £156.3bn (£21.7bn lower than the original Treasury forecast) as evidence that Labour's policy of "going for growth" was beginning to fill the hole in the public finances. Osborne's insistence that Labour doesn't have a "credible deficit reduction plan" ignores that, without growth, neither does he.

Elsewhere, as the Spectator's Peter Hoskin has noted, Balls refused to predict a double-dip recession. Asked if he thought one was likely, he replied: "I really hope not. I think the most likely outcome is months of stagnant growth, unless George Osborne digs himself out of this hole." The risk of a double dip is real, as the NS economics editor David Blanchflower argued this morning, but this was an act of necessary caution from Balls.

Osborne's decision to put so much emphasis on the weather in his response to the figures has already been widely ridiculed and was a clear misjudgement. As the Office for National Statistics pointed out in its briefing, if you strip out the effects of the snow, growth is still flat at 0 per cent. The Chancellor could only reply that "estimates are highly uncertain at the moment".

When asked for a "plan B", Osborne responded that he can hardly "cancel" the cuts, a caricature of his opponents' position. But he could have easily cancelled the VAT rise, which, according to the Office for Budget Responsibility, will reduce GDP by 0.3 per cent alone. History may record that as his biggest misjudgement.

George Eaton is political editor of the New Statesman.

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Theresa May gambles that the EU will blink first

In her Brexit speech, the Prime Minister raised the stakes by declaring that "no deal for Britain is better than a bad deal for Britain". 

It was at Lancaster House in 1988 that Margaret Thatcher delivered a speech heralding British membership of the single market. Twenty eight years later, at the same venue, Theresa May confirmed the UK’s retreat.

As had been clear ever since her Brexit speech in October, May recognises that her primary objective of controlling immigration is incompatible with continued membership. Inside the single market, she noted, the UK would still have to accept free movement and the rulings of the European Court of Justice (ECJ). “It would to all intents and purposes mean not leaving the EU at all,” May surmised.

The Prime Minister also confirmed, as anticipated, that the UK would no longer remain a full member of the Customs Union. “We want to get out into the wider world, to trade and do business all around the globe,” May declared.

But she also recognises that a substantial proportion of this will continue to be with Europe (the destination for half of current UK exports). Her ambition, she declared, was “a new, comprehensive, bold and ambitious Free Trade Agreement”. May added that she wanted either “a completely new customs agreement” or associate membership of the Customs Union.

Though the Prime Minister has long ruled out free movement and the acceptance of ECJ jurisdiction, she has not pledged to end budget contributions. But in her speech she diminished this potential concession, warning that the days when the UK provided “vast” amounts were over.

Having signalled what she wanted to take from the EU, what did May have to give? She struck a notably more conciliatory tone, emphasising that it was “overwhelmingly and compellingly in Britain’s national interest that the EU should succeed”. The day after Donald Trump gleefully predicted the institution’s demise, her words were in marked contrast to those of the president-elect.

In an age of Isis and Russian revanchism, May also emphasised the UK’s “unique intelligence capabilities” which would help to keep “people in Europe safe from terrorism”. She added: “At a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty. We are leaving the European Union, but we are not leaving Europe.”

The EU’s defining political objective is to ensure that others do not follow the UK out of the club. The rise of nationalists such as Marine Le Pen, Alternative für Deutschland and the Dutch Partij voor de Vrijheid (Party for Freedom) has made Europe less, rather than more, amenable to British demands. In this hazardous climate, the UK cannot be seen to enjoy a cost-free Brexit.

May’s wager is that the price will not be excessive. She warned that a “punitive deal that punishes Britain” would be “an act of calamitous self-harm”. But as Greece can testify, economic self-interest does not always trump politics.

Unlike David Cameron, however, who merely stated that he “ruled nothing out” during his EU renegotiation, May signalled that she was prepared to walk away. “No deal for Britain is better than a bad deal for Britain,” she declared. Such an outcome would prove economically calamitous for the UK, forcing it to accept punitively high tariffs. But in this face-off, May’s gamble is that Brussels will blink first.

George Eaton is political editor of the New Statesman.