Constraining our debt is not about left-wing or right-wing politics

We must avoid the potential devastation of compound interest.

The Roman Emperor Caligula knew about keeping people on his side – he would literally shower them with money, spraying specially minted coins from the first floor of the Forum onto an adoring crowd. But Caligula also knew that you shouldn’t do too much of it. It’s a lesson that Shadow Chancellor Ed Balls would do well to listen to.

Balls is arguably one of the most controversial politicians at work today. Every part of his sensibilities appears to lie with increasing government expenditure, which translates into higher and higher government borrowing. The unholy truce he has negotiated with Labour party leader Ed Miliband to stick to the coalition’s post-2015 spending plan is nothing more than a tissue-thin tactic to get the pair, and the Labour Party, past the finishing line of the next General Election without spooking the markets.

Balls’ approach to spending was forged in the heat of the administration of Gordon Brown, himself no stranger to the idea that the public purse could be extended infinitely as long as the tax take was coming in – even if it was from the City of London. But when the spring tide of money went out in 2008, the abandoned shopping carts and tangled web of detritus that is our public finances were obvious for all to see, and with it the budget deficit ballooned. The total size of our national stock of debt has been trundling steadily upwards ever since and in the next couple of years its value will hit £2trn. That’s about 120 per cent of our annual national income.

But this doesn’t satisfy the shadow chancellor. Even when George Osborne announces that the deficit has not reduced as expected, Balls performs that most elegant of political pirouettes that sees him telling us that our borrowing is both shockingly large and, simultaneously, not enough. In the City the collective slapping of foreheads is audible – political rhetoric and word play doesn’t really have a place for those trying to work their way through delicately balanced financial markets that are – simultaneously – incredulous and credulous that we are where we are or that our current borrowing can be sustained.

Advocating government spending control is more than usually associated with "being right wing". But "the right wing" have lots to gain from increased government debt; company profits rise and with it the value of shares. City traders could "short" our currency and bond markets in order to make a profit as they fall.

So it’s frustrating that the debate over government spending is lazily classified as a "right versus left" clash.  In fact the main goal of the Deficit Constrainers is to stop the God of Compound Interest from taking over our public finances; when you have to start borrowing to pay your interest bill you don’t have to be a customer of Wonga.com to understand you are in trouble.

And that is where the UK is. Deficit Constrainers, by and large, want a situation that is out of control brought under control, because in their view the ultimate cost to society of an ever-increasing interest bill is greater than standing back and wilfully ignoring that it is happening. For a graphic illustration of  where this ends take a look at the images of Greece and Argentina that have flitted across our screens in recent years – societies devastated by the effects of a national debt out of control when compounding took over.

You think it can’t happen here? Think again – because it isn’t political, it’s mathematics. And this is why Ed Balls is so dangerous – he appears to treat our national finances and the debate around them as a vehicle for political power rather than the national good. From the apparent policy tensions and by Balls’ own recent Commons performances it is conceivable that he could split from the Labour Party and join a new left-leaning organization whose main agenda is expanding public expenditure leaving behind a party struggling to differentiate itself from the others. Alternatively, he could stay in the Labour Party, who are then elected in 2015 on the basis of who they aren’t, and begin a Caligulaean campaign to increase expenditure from within government. Either way, after the silly season and the post-Carney carnival has moved on and we are faced once more with our realities, the attitude of Ed Balls towards government expenditure will have much more significance for how the markets view us than we are currently allowing for.

It’s frustrating that the debate over government spending is lazily classified as a "right versus left" clash. Photograph: Getty Images

Head of Fixed Income and Macro, Old Mutual Global Investors

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Four times Owen Smith has made sexist comments

The Labour MP for Pontypridd and Jeremy Corbyn’s Labour leadership rival has been accused of misogynist remarks. Again.

2016

Wanting to “smash” Theresa May “back on her heels”

During a speech at a campaign event, Owen Smith blithely deployed some aggressive imagery about attacking the new Prime Minister. In doing so, he included the tired sexist trope beloved of the right wing press about Theresa May’s shoes – her “kitten heels” have long been a fascination of certain tabloids:

“I’ll be honest with you, it pained me that we didn’t have the strength and the power and the vitality to smash her back on her heels and argue that these our values, these are our people, this is our language that they are seeking to steal.”

When called out on his comments by Sky’s Sophy Ridge, Smith doubled down:

“They love a bit of rhetoric, don’t they? We need a bit more robust rhetoric in our politics, I’m very much in favour of that. You’ll be getting that from me, and I absolutely stand by those comments. It’s rhetoric, of course. I don’t literally want to smash Theresa May back, just to be clear. I’m not advocating violence in any way, shape or form.”

Your mole dug around to see whether this is a common phrase, but all it could find was “set back on one’s heels”, which simply means to be shocked by something. Nothing to do with “smashing”, and anyway, Smith, or somebody on his team, should be aware that invoking May’s “heels” is lazy sexism at best, and calling on your party to “smash” a woman (particularly when you’ve been in trouble for comments about violence against women before – see below) is more than casual misogyny.

Arguing that misogyny in Labour didn’t exist before Jeremy Corbyn

Smith recently told BBC News that the party’s nastier side only appeared nine months ago:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.”

Luckily for Smith, he had never experienced misogyny in his party until the moment it became politically useful to him… Or perhaps, not being the prime target, he simply wasn’t paying enough attention before then?

2015

Telling Leanne Wood she was only invited on TV because of her “gender”

Before a general election TV debate for ITV Wales last year, Smith was caught on camera telling the Plaid Cymru leader that she only appeared on Question Time because she is a woman:

Wood: “Have you ever done Question Time, Owen?”

Smith: “Nope, they keep putting you on instead.”

Wood: “I think with party balance there’d be other people they’d be putting on instead of you, wouldn’t they, rather than me?”

Smith: “I think it helps. I think your gender helps as well.”

Wood: “Yeah.”

2010

Comparing the Lib Dems’ experience of coalition to domestic violence

In a tasteless analogy, Smith wrote this for WalesHome in the first year of the Tory/Lib Dem coalition:

“The Lib Dem dowry of a maybe-referendum on AV [the alternative vote system] will seem neither adequate reward nor sufficient defence when the Tories confess their taste for domestic violence on our schools, hospitals and welfare provision.

“Surely, the Liberals will file for divorce as soon as the bruises start to show through the make-up?”

But never fear! He did eventually issue a non-apology for his offensive comments, with the classic use of “if”:

“I apologise if anyone has been offended by the metaphorical reference in this article, which I will now be editing. The reference was in a phrase describing today's Tory and Liberal cuts to domestic spending on schools and welfare as metaphorical ‘domestic violence’.”

***

A one-off sexist gaffe is bad enough in a wannabe future Labour leader. But your mole sniffs a worrying pattern in this list that suggests Smith doesn’t have a huge amount of respect for women, when it comes to political rhetoric at least. And it won’t do him any electoral favours either – it makes his condemnation of Corbynite nastiness ring rather hollow.

I'm a mole, innit.