Ed Balls rails against cuts to manufacturing

“Curtailing ambition”.

Ed Balls used his address to yesterday’s EEF Manufacturing Conference, perhaps unsurprisingly, as a platform to rail against spending cuts in advance of the delivery of the budget in two weeks’ time.

Playing straight to his manufacturer audience’s fear of Britain sliding into industrial obscurity, he warned that the government’s obsession with deficit reduction at the expense of long-term investment would “curtail ambition” in business and “militate against” the UK’s ability to compete with Europe (read, Germany).

His appearance at the conference coincided with the publication today of a labour-commissioned report by Sir George Cox, Overcoming short-termism within British business, which argues for executive pay to reflect success over longer cycles, tax changes to favour equity markets, and a mechanism to make infrastructure investment decisions independent of political cycles.

Despite a fantastically awkward bit of audience Q&A, in which Balls avoided verbally signing his party up to Sir George’s proposals even though the report author was sitting just feet away in the front row, the rhetoric seemed to go over well with delegates.

But in terms of a demonstration of long term-thinking, the Sturm & Drang over the budget’s treatment of British business paled in comparison to the day’s opening presentation, delivered by Jim “BRICs” O’Neill, Goldman Sachs’ chairman of asset management.

As one might expect from the man who coined the now ubiquitous acronym for emerging markets, O’Neill had very little to say directly about the state of British industry, and even the UK’s fortunes in the context of the Eurozone crisis.

Instead he spoke frankly, and backed by some very big statistics, about the overwhelming importance of emerging markets, particularly China, to both the UK and world economies over the decades to come.

Professing himself to be an optimist, O’Neill predicted the world economy would grow close to 4 per cent in the current decade, largely thanks to China which, he reminded us in words notoriously borrowed by David Cameron, grows the equivalent of Greek GDP every twelve and a half weeks. To underscore the point, O’Neill mentioned in passing that China had, since the end of 2010, grown by approximately the current size of the Indian economy.

He said that if the US and China could partially reverse their traditional roles with regard to production and consumption, so that China ended up “spending more and producing less” and the US vice versa, “it would be a very good sign – and this appears to be happening.”

In response to audience anxiety over the Eurozone, he acknowledged that while Europe was still the single most important export region for the UK, the percentage of UK exports going to the Eurozone had fallen from 55 per cent to 45 per cent over the last decade, and would likely fall further to 39 per cent by 2020.

By the same point time, he argued, 17 per cent of UK exports will likely be destined for the BRICs, while Germany will probably be exporting twice as much to China as to France. If we had known that in the early 1990s, he posited, there might never have been a Eurozone in the first place.

When drawn by session chair Krishnan Guru-Murthy on what he would do if he were chancellor in two weeks, his answer said more through understatement than Balls did through twenty minutes on the soapbox:

“Those nations with more emphasis on long-term fiscal consolidation rather than a "cut debt now" mentality tend to be recovering better… It’s entirely understandable to want to lower debt and to shrink [the financial services] sector… but trying to do both at once? It could be very difficult, and I think I’ll leave it at that”.

Ed Balls. Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

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The clever ideological trick that could save the Labour party

The Co-operative party could suddenly get a lot more popular. 

It’s do or die for the party’s moderate MPs, who have lost the fight for the soul of Labour and must quickly move on. 

The 172 Labour MPs who backed a no-confidence vote in Jeremy Corbyn earlier this year may not like their newly elected party leader much, but they loathe John McDonnell. 

So it is little surprise that one of them, John Woodcock, reportedly looked “sick to the stomach” when the Shadow Chancellor tenderly invited him for a cuppa in his office following the leadership election result at conference. Reading the tea leaves tells me those talks aren’t going to go well.  

Yet moderate MPs would do well to revisit McDonnell’s off-the-cuff comments from a few years back: “I’m not in the Labour party because I’m a believer of the Labour party as some supreme body or something God-given or anything like that,” he told a small audience in 2012. “It’s a tactic. It’s as simple as that. If it’s no longer a useful vehicle, move on.” 

Two feather-spitting former frontbenchers called for McDonnell’s resignation when these comments emerged in March, saying they revealed his Trotskyist tendencies. "The context (a hard-left gathering) and the company (which included Gerry Downing, expelled from Labour for his comments on 9/11) didn’t make for great publicity, no," a Leader’s Office staffer privately confesses. 

But McDonnell is right: There is nothing necessary, natural or divinely ordained about Labour’s existence lest it can get things done. Which is why the parliamentary Labour party cannot botch its next attempt at power. 

In the wake of Corbyn’s re-election, Labour MPs face a fork-in-the-road: fight this civil war until its bitter end - play the long game, wait until Labour loses the next general election and challenge Corbyn again - or start afresh. 

It is a bleak, binary choice, akin to a doctor delivering test results and declaring the illness is terminal as feared: the patient can go down fighting and die a slow death, notwithstanding a medical miracle, or instead take part in a pioneering new drug trial. This carries the risk of dying immediately but promises the possibility of life as well. Both options are fraught with danger.

The problem with the first option is that moderates have all but lost the party already. A poll reveals Corbyn won 85 per cent - 15 per cent among members who joined after he became party leader and lost 37 per cent - 63 per cent among those who were members of the party before the last general election. The result: victory by 119,000 votes. 

Corbyn has already announced he wants to give these foot soldiers far greater firepower and told Andrew Marr he had asked the NEC to draft plans for increasing the membership and including it in “all aspects of party decision making”. Labour is transitioning apace into a social movement: free of formal hierarchy and ambivalent about parliamentary power. 

So why wait until 2020? There is every chance that MPs won’t any longer have the power to challenge to Corbyn within four years’ time. If Momentum has its way with reselection and shadow cabinet elections, leading rebels may not be around to begin with. 

Even if MPs mount another leadership challenge, few believe organisations like Saving Labour or Labour First could put together a sizeable enough electorate to outgun Corbyn at the ballot box. He would be voted back in by a landslide. 

The alternative is for MPs to create a new centre-left force. The main plan under consideration is to join the Cooperative party, Labour’s sister party, and sit as a bloc of “double hatted” MPs, with their own policy agenda on Brexit and the economy. This new bloc would apply to the Speaker to become the official opposition. 

Plenty of MPs and members recoil at the idea of a semi-split like this because of the mixed message it would send to voters on the doorstep. "So you don’t have faith in Corbyn, but you’re a Co-op MP campaigning on behalf of his Labour?" Many believe a full-split would be worse. They fear being pitted against Corbyn-backed Labour candidates in local constituencies and splitting the left vote, opening the door to Ukip or the Conservatives in marginal seats. 

But if moderate MPs mean what they say when they warn of total electoral wipeout in 2020, risking a new centre-left grouping is intuitively worth it.  What do they have to lose? And how many more times can Labour’s moderates cry wolf - Labour "risks extinction", Sadiq Khan said yesterday - until voters call their bluff and tell them to quit complaining and fall in line behind their leader? 

While Corbyn’s polling remains disastrous, a Co-op/Labour party would boast a mandate of 9.3m people, a policy agenda in line with Britain’s political centre of gravity and a chance of becoming the official opposition: a risk worth taking in the face of electoral oblivion. 

A handful of battle-bruised MPs are talking about coming together. "Time to unite," a deflated Hilary Benn tweeted this weekend. There is a precedent for this: first past the post means the party has always been composed of uneasy coalitions of different groups - take the trade unionists, liberal cosmopolites and ethnic minorities of the New Labour years - and it is arguably no different now.  

Yet this is not about a coalition of diverse interests. It is about two parties within a party, each of which believes Labour is their rightful inheritance. Of the two, moderates are least likely to gain anything by engaging in an all out war. It is time they took a leaf out of McDonnell’s book and accepted it is time, regrettably, "to move on". 

Gabriel Pogrund is a journalist at The Sunday Times and a Google News Fellow 2016.