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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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

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