The Staggers

The New Statesman’s rolling politics blog

Balls: we're losing the battle but we'll win the war

Shadow chancellor insists that "in the end, good economics is good politics too."

By George Eaton Published 06 December 2011 12:28

If George Osborne can't eliminate the deficit in this parliament, we will do so in the next. That's the fiscally responsible message from Ed Balls in today's Times. The failure of Osborne's plan means that any future Labour government will inherit a budget deficit of £79bn (4.5 per cent of GDP) and a structural deficit of -1.6 per cent. The result is that Balls's party will be forced to cut (or tax) more than it ever previously imagined (a point made eloquently by In the black Labour)

With this in mind, the shadow chancellor repeats the message that he delivered in his conference speech earlier this year: Labour will set itself "tough fiscal rules" before the next election and will use any windfall from the sale of the bank shares to repay the national debt, rather than fund a giveaway. He writes: "Credibility is based on trust and trust is based on honesty, so we must be clear with the British people that under Labour there will have to be cuts."

The weakness remains that Labour is alarmingly vague about where it would cut. No one expects a shadow spending review but Balls and others must do far more to convince voters that their commitment to cuts is more than just rhetorical. Even Diane Abbott had Trident.

For now, Balls is clear that his plan would mean more borrowing, not less. The difference is that while Labour would borrow to fund growth, Osborne is borrowing to meet the cost of unemployment. He writes: "The argument is whether it is better to be borrowing billions more to keep people out of work on benefits or whether action now to get our economy moving will get more people into work paying tax and help to get the deficit down in a fairer way." But that's not an easy argument for Labour to make in the current circumstances. Balls is attacking Osborne for missing his deficit targets while simultaneously making the case for higher borrowing.

As he writes:

I have heard much advice over the past year from people who admit that combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan may be good economics, but they argue that it is bad politics because it is "out of tune" with the public mood.

That is a tacit acknowledgement that, despite a slew of terrible data, the Tories are still winning the economic debate. Osborne's lead over Balls as the best Chancellor (30 per cent to 24 per cent) actually rose in the wake of the autumn statement and more people still blame the last Labour government (32 per cent) for low growth than the current government (28 per cent).

But Balls finishes by mischievously quoting his "old friend" Ken Clarke, who argues that, in the end, "good economics is good politics too." The shadow chancellor's wager is that while Labour is losing the battle, it will win the war. His party's fortunes depend on him being right.

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Tags: Ed Balls

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20 comments

Tue, 2011-12-06 13:06 — swatantra nandanwar

Only losers would say that.
What he should have said is : 'We'll fight and fight and fight again to save the country we love.'

Tue, 2011-12-06 13:18 — Chintoo

Ed, repeat after me...' I have balls the size of spacehoppers and will be the next Prime Minister!'

Tue, 2011-12-06 13:24 — I walker (not verified)

Labour need more on where and how they are going to create a fairer society. How they are going to level the playing field by removing social and economic privileges for the 'rich' in order to persuade the general public that paying more taxes themselves will be worth it.

Tue, 2011-12-06 13:30 — REPAY

Balls needs to understand that the Coalition is not the enemy - the enemy is the debt-fuelled poverty generated by the Balls/Brown bust. Balls placed his undoubted expertise in the service of a public sector boom in wages, benefits with negligible increase in output.

Tue, 2011-12-06 13:31 — Kate H (not verified)

I don't know if this makes me sad or disgusts me. Probably both. Labour should be offering an alternative cuts, if that means progressive taxation and even nationalisation then good. There is nothing vaguely about this that fits in with the labour movement (small 'l'), leftism, socialism or even social democracy. Sick.

Tue, 2011-12-06 13:44 — Benjamin Rae (not verified)

Kate I agree. The Labour party are finished as a progressive force. I was particuarly disgusted with the others Ed's poison re welfare.
You know what the Tories about. But Labour can be more dangerous as they attempt to represent themselves as on ordinary peoples side

Tue, 2011-12-06 14:17 — saltyseadog1

Of course it was the Labour party who were in power when the recession hit but anyone who thinks that it would have been any different under the Tories is living in cloud cuckoo land. Labour should have done more to curb the banks along with every other western democracy but had the Tories been in power at the time and remember this is the party which is bankrolled by the banks and big business does anyone really believe that we wouldn't be in a far worse state today.

Tue, 2011-12-06 14:39 — thinkov

nationlise nationalise tax tax tax

disempower the rich

Tue, 2011-12-06 15:10 — mcquade

"The result is that Balls's party will be forced to cut (or tax) more than it ever previously imagined"

Patently false, George Eaton. The Darling plan which Labour is still adhering to, set out to only halve the deficit in this parliament. I've done the maths, now you do it before engaging keyboard.

Tue, 2011-12-06 15:15 — Fraziel1

I will never vote labour again as they have abandoned working people and allowed a tide of immigrants to come here claiming billions in benefits while i, and many others who have lived here all our lives, can't get a pay rise.They allowed people to get so much on benefits they can choose to stay on them rather than work. If they want to have any chance of winning they must do one simple thing, ditch Ed Miliband. Balls is a good shadow chancellor but people will not return to labour while Miliband is leader.He is poor and is the new Kinnock. Full of promise and turned out to be useless.

Tue, 2011-12-06 16:04 — Colin Clement (not verified)

The deficit was not of labour's making it was the bankers. 2.6% growth in the last 6 months of Labour, 0.1% growth in 18 months of the ConDem with a blame anyone bar himself Chancellor. Introdue progressive taxation, stop throwing public money at Transport, by re-nationalisation of the Railways. Clamp down on Tax evasion, re Vodaphone, etc. That should bring in a few quid for starters.

Tue, 2011-12-06 16:46 — Stu (not verified)

@Fraziel1
Both Ed's are useless, who's going to trust Balls? He's the one that believes more borrowing is needed but what you said is correct, Labour screwed this country over in the so called boom years. I wouldn't vote for them again.

@Colin
"The deficit was not of labour's making it was the bankers" - Thats a massive half truth! yes the banks were to blame but if you bloody think that Labour can wash their hands of building up a massive deficit you're living in denial. Labour had 10 years of boom how the hell can they fail so badly and what have we really got return? - to summarise Fraziel1 comment:
1)immigration disaster
2)shocking benefits system
3)crappy education system
4)student fees
5)over spend on NHS with little results eg IT system and the list goes on and on.

Labour had more than enough time to fix the country and they failed.

Tue, 2011-12-06 16:48 — Andy Barton (not verified)

The problem though Colin, is that Balls quotes Keynesian theory at every opportunity, but when Brown was Chancellor, he broke the fiscal rules of Keynes with Balls at his side. For it to work a nation should pay down it's debt during boom years and then borrow to grow when in recession. Labour didn't. They ran a deficit throughout the last 10 years (regardless of the bankers), so any Chancellor in power now has a far more difficult job to turn the economy round. Anyone who thinks that Labour were prudent needs to check the facts.

Tue, 2011-12-06 16:55 — Benjamin Rae (not verified)

Have never and will never vote Tory. Anybody with an ounce of sense or awareness knows they are the enemy of those who don't happen to wealthy. Labour however can be more dangerous as they are able to fool people that they represent the interests of the working person. They don't and haven't for some time. That's what makes them dangerous. They're just a slightly less extreme version of what the Tories are.
Labour give the illusion of a real alternative.

Tue, 2011-12-06 18:19 — rob andersen (not verified)

' No one expects a shadow spending review but Balls and others must do far more to convince voters that their commitment to cuts is more than just rhetorical. Even Diane Abbott had Trident'
says it all.
One can imagine it. he watches Osborne deliver the really really bad news, attacks, walks out thinking job done... to awake the next morning and see that people wanted the honesrty!! hell, 1 poll even put them in the lead now. So it's crisis time for the bruiser, change of plan, emergency meetings... to get some graft done?? some real number crunching?? er no chance. Quick call to the Times and a new approach-'WE, the labour party (pounds his chest) will make DEEP cuts (er no scribbles that out) will raise taxes (er, scribbles that out) er, will implement tough fiscal rules (raises back of hand to brow) IT WILL HURT...)
Well done balls, very credible - wellm, credible enough for many groupies here.
P.S. balls when u send the jub Chukka on to newsnight its really worth advising him not to get into a scrap on deficits and debt with Ken Clarke... Chkka actually opend a salvo at Clarke with "I'm not going to take lectures at you about debt..." I mean how easy do u want to make it?? Can't the left see it?? Balls defers, leaving poster boy to take on the man who followed lamont and lawson...er, then slap head starts giving economic advice... have actually recorded that clip, need to get it on u tube.

Tue, 2011-12-06 19:11 — matthew fox (not verified)

Attacking Labour is far easier then defending Osbornes terrible economic stwewardship.

The dark days were supposed to behind us, the makers were marching and the deficit was going to be eliminated by 2015.

Strange how Stu missed these points.

Wed, 2011-12-07 19:54 — matthew fox (not verified)

Come on Stu, ignoring all this bad economic data, just undermines your "Flimsy" argument.

You don't know what I am going to say, your not psychic.

The entire west is going into an economic metldown?

When you mean West ?

Come on Stu, more schoolboy errors.

Tue, 2011-12-06 20:30 — Indu Pendent (not verified)

@colin
"The deficit was not of labour's making it was the bankers."

OMG run everyone Colin's a zombie.

Before 2008 and the banking crisis, Balls and Brown borrowed £350Bn but did not invest it. Instead they used it to grow the public sector resulting in the structural deficit.

During the same period, UK industry declined at its fastest rate since the 1970s (during Labour's 'economic miracle')

So Labour caused the structural deficit based on the facts. But didnt based on the Labour spin.

Tue, 2011-12-06 20:38 — Indu Pendent (not verified)

@matt

Foxy, can you swim and do you like gingerbread men? Might have a staring film role for you. You might need to study the plot to get it.

I'm sure you agree but its great that the UK's AAA is sticking and the markets have confidence in Osborne. The UK is on track to be the only major ecomony with an AAA.

Do you think Balls still thinks that down rating the UK's AAA would be a good thing so that he can go on a borrowing and voter treat spending binge to win power?

Tue, 2011-12-06 21:44 — Stu (not verified)

@matty
yeah and it was easy to attack Tories than defending Brown /balls when he was in govt. It works both ways. the difference is we have a 13 year record of Labour in power and we only have 18 months on Tory.

I know you're about to say.. 'oh but the 18 months of... ' what and 10 years of boom isn't enough of an argument to say that Labour messed up BIG time. even with 'no more boom bust' we still got into recession and Brown thought it was going to last 6 months... how bad is that? incredible how you are still defending Labour. Who could have guessed that te euro, the entire west is going through such arsehole of an economic meltdown... Brown? Balls? wait... it's all ok... we can just borrow more money... money makes the world turn doesn't it?... Balls was just a genius... the best thing Labour can do is get rid of both of them.