Balls's new strategy is a political masterstroke

His commitment to long-term fiscal discipline strengthens the case for short-term stimulus.

Ed Balls's speech isn't until this afternoon (we'll be live blogging his speech from 12pm) but it's been leading the news all morning. And with good reason. The shadow chancellor is preparing to unveil a new strategy which will see him maintain the case for short-term stimulus but commit to long-term fiscal discipline. Balls will promise to meet the two pledges set out by George Osborne - to eliminate the structural deficit and to ensure a falling debt-to-GDP ratio - and will announce that these will be monitored by the Office for Budget Responsibility (this morning, for the first time, he said that setting up the OBR was "the right thing to do".) In addition, he will promise that any windfall from the sale of state-owned bank shares (estimated by the OBR at £3.4bn) will be used exclusively to pay down the deficit and not to cut taxes.

Balls's smart calculation is that these promises will provide him with the political cover necessary to make the case for renewed stimulus in the form of a temporary cut in VAT and other measures (he has promised to set out a five-point plan for restoring growth in his speech). As Keynes put it: "The boom, not the slump, is the right time for austerity at the Treasury." This is an economic truth that entirely eludes George Osborne. The eurozone crisis has demonstrated precisely why austerity is self-defeating. As Balls argued this morning, there is no reason to believe that the markets would panic if Britain slowed the pace of its deficit reduction programme, not least while the UK can borrow at near historic lows. "The markets know that if economies aren't growing, then you get into a vicious circle and your debt dynamics can actually make a debt unsustainable," he said.

Osborne will reply that Balls's answer to a debt crisis is always more debt. But his own strategy has reduced growth, increased unemployment and, consequently, slowed the pace of deficit reduction (Osborne has already been forced to announce an extra £46bn of borrowing). As the self-defeating nature of Osborne's approach becomes clearer, voters will look for an alternative. Balls is providing it.

George Eaton is political editor of the New Statesman.

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Theresa May knows she's talking nonsense - here's why she's doing it

The Prime Minister's argument increases the sense that this is a time to "lend" - in her words - the Tories your vote.

Good morning.  Angela Merkel and Theresa May are more similar politicians than people think, and that holds true for Brexit too. The German Chancellor gave a speech yesterday, and the message: Brexit means Brexit.

Of course, the emphasis is slightly different. When May says it, it's about reassuring the Brexit elite in SW1 that she isn't going to backslide, and anxious Remainers and soft Brexiteers in the country that it will work out okay in the end.

When Merkel says it, she's setting out what the EU wants and the reality of third country status outside the European Union.  She's also, as with May, tilting to her own party and public opinion in Germany, which thinks that the UK was an awkward partner in the EU and is being even more awkward in the manner of its leaving.

It's a measure of how poor the debate both during the referendum and its aftermath is that Merkel's bland statement of reality - "A third-party state - and that's what Britain will be - can't and won't be able to have the same rights, let alone a better position than a member of the European Union" - feels newsworthy.

In the short term, all this helps Theresa May. Her response - delivered to a carefully-selected audience of Leeds factory workers, the better to avoid awkward questions - that the EU is "ganging up" on Britain is ludicrous if you think about it. A bloc of nations acting in their own interest against their smaller partners - colour me surprised!

But in terms of what May wants out of this election - a massive majority that gives her carte blanche to implement her agenda and puts Labour out of contention for at least a decade - it's a great message. It increases the sense that this is a time to "lend" - in May's words - the Tories your vote. You may be unhappy about the referendum result, you may usually vote Labour - but on this occasion, what's needed is a one-off Tory vote to make Brexit a success.

May's message is silly if you pay any attention to how the EU works or indeed to the internal politics of the EU27. That doesn't mean it won't be effective.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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