Balls v Osborne: round one

Tomorrow’s growth figures will determine who takes an early lead in the cuts debate.

The release of the latest growth figures tomorrow will determine whether it is Ed Balls or George Osborne who takes an early lead in the defining grudge match of this parliament.

If, as expected, growth falls from 0.7 per cent in the third quarter to between just 0.2 per cent and 0.5 per cent, Balls's argument that early spending cuts choke off recovery, lead to higher unemployment and slow the pace of deficit reduction will begin to resonate with the public.

Osborne may have hubristically declared that the "plan is working" but, owing to the time lag in fiscal policy, much of the growth we've seen so far has been due to the last Labour government's stimulus package and the Bank of England's ultra-loose monetary policy.

As the Times's Anatole Kaletsky, responding to impressive Q2 growth of 1.1 per cent, wrote in October (£):

The trouble is that monetary and fiscal policies take a long time to work their way through the economy – typically, one to two years. Yesterday's robust growth figures reflect last year's decisions by the Bank and the previous government. They tell us nothing, and indeed may mislead us, about how the new government's fiscal measures will interact with the Bank's monetary policies in the years ahead.

Balls can point 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. The Tories may hope to use Balls's past predictions of a double-dip recession against him, but "things could be even worse" isn't much of an argument.

With inflation at 3.7 per cent, we can expect the spectre of stagflation to re-emerge if growth is as low as 0.4 per cent. Balls, a Harvard-trained economist, will be able to exploit this development in a way Alan Johnson simply could not. With unemployment also rising, Osborne will need a better riposte than "there is no alternative".

There should be plenty for Keynes's Rottweiler to get his teeth into tomorrow.

George Eaton is political editor of the New Statesman.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.