Balls exploits the Tories' normality deficit

Calling for cheaper prices is an attempt to portray Cameron and Osborne as out of touch.

The big news line from Ed Balls's speech at the London School of Economics this morning is the call for an emergency tax cut. George Osborne's Plan A for the economy isn't working, the shadow chancellor argued. Again. The economy needs a jump start of fiscal loosening in the form of a temporary VAT reduction. Balls made a pretty robust case for cutting sales taxes -- it can be implemented immediately; it releases cash directly to consumers and company bottom lines. He also argued that the VAT cut introduced by Alistair Darling in the 2008 pre-budget report worked, citing an Institute for Fiscal Studies analysis for corroboration.

Labour got rough ride over that decision. In fact, it was widely ridiculed with jibes along the lines: "how does shaving a few pennies off the price of a new TV save the economy from crisis?" But that was before inflation had become an urgent concern for squeezed consumers and the government. When challenged on the effectiveness of the proposed cut in the Q&A after the speech, Balls had a deft political parry: Tory critics might not notice a VAT holiday (the implication being that they can afford higher prices) but ordinary folk would.

Both Labour and Tory private polling shows the public are wary of David Cameron and George Osborne as "not like ordinary people" -- distant, aloof. Balls and Miliband haven't yet found a way of really capitalising on the Conservatives' normality deficit, but calling for cheaper prices at the checkout is a try.

This was billed as a lecture rather than a speech -- a forensic critique of the government's macroeconomic strategy and not just another blast of political rhetoric.

But this is Ed Balls, we're talking about; the man who was once described to me by a senior Labour party strategist as "someone who wakes up every morning asking himself how he can destroy the Tories." The economic argument around the deficit was pretty familiar -- a rococo riff on the established theme of "too far, too fast". The political angle shone through in repeated references to the Tories' shambolic exit from the Exchange Rate Mechanism (ERM) in 1992. The argument is that George Osborne's single-minded determination to stick with fiscal Plan A is starting to resemble Norman Lamont's predicament, sticking with a fixed exchange rate as evidence mounted that it was an unsustainable arrangement. Whereas Lamont was institutionally locked into the ERM, Balls argues, Osborne could change course. There are alternatives. Lamont's hands were tied; Osborne's are not. That makes the rigidity all the more perverse and the Chancellor more culpable if things go wrong.

I counted ten references to the ERM. It was the unifying theme of the speech. Of course it was. The ERM exit -- Black Wednesday -- was famously the moment the Tories lost credibility on the economy. David Cameron was an advisor to Lamont at the time. No wonder Balls wants the analogy to stick.

An aside: Balls had a relatively contrite line about Labour's fiscal record. "Of course we didn't spend all of the money wisely. No government does." When I asked him to specify where there had been a lack of wisdom he cited Labour's multiple and wasteful reorganisations in healthcare, in particular the fiddling around with the structure of Primary Care Trusts. It's a good one to own up to, for pretty obvious reasons.

The spending line was one of a few very last minute additions to the speech, tacked on this morning, apparently; recognition perhaps that Labour needs to sound a little more penitent about the past before it can be trusted to talk about the future?

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

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Tom Watson rouses Labour's conference as he comes out fighting

The party's deputy leader exhilarated delegates with his paean to the Blair and Brown years. 

Tom Watson is down but not out. After Jeremy Corbyn's second landslide victory, and weeks of threats against his position, Labour's deputy leader could have played it safe. Instead, he came out fighting. 

With Corbyn seated directly behind him, he declared: "I don't know why we've been focusing on what was wrong with the Blair and Brown governments for the last six years. But trashing our record is not the way to enhance our brand. We won't win elections like that! And we need to win elections!" As Watson won a standing ovation from the hall and the platform, the Labour leader remained motionless. When a heckler interjected, Watson riposted: "Jeremy, I don't think she got the unity memo." Labour delegates, many of whom hail from the pre-Corbyn era, lapped it up.

Though he warned against another challenge to the leader ("we can't afford to keep doing this"), he offered a starkly different account of the party's past and its future. He reaffirmed Labour's commitment to Nato ("a socialist construct"), with Corbyn left isolated as the platform applauded. The only reference to the leader came when Watson recalled his recent PMQs victory over grammar schools. There were dissenting voices (Watson was heckled as he praised Sadiq Khan for winning an election: "Just like Jeremy Corbyn!"). But one would never have guessed that this was the party which had just re-elected Corbyn. 

There was much more to Watson's speech than this: a fine comic riff on "Saturday's result" (Ed Balls on Strictly), a spirited attack on Theresa May's "ducking and diving; humming and hahing" and a cerebral account of the automation revolution. But it was his paean to Labour history that roused the conference as no other speaker has. 

The party's deputy channelled the spirit of both Hugh Gaitskell ("fight, and fight, and fight again to save the party we love") and his mentor Gordon Brown (emulating his trademark rollcall of New Labour achivements). With his voice cracking, Watson recalled when "from the sunny uplands of increasing prosperity social democratic government started to feel normal to the people of Britain". For Labour, a party that has never been further from power in recent decades, that truly was another age. But for a brief moment, Watson's tubthumper allowed Corbyn's vanquished opponents to relive it. 

George Eaton is political editor of the New Statesman.