Balls confirms that Labour will vote against Osborne's welfare bill

Shadow chancellor says his party will oppose any bill that unfairly hits working families.

Appearing at Treasury questions in the Commons, Ed Balls has just confirmed that Labour will vote against the government's Welfare Uprating Bill, which would cap benefit increases at 1 per cent for the next three years. "If he [George Osborne] intends to go ahead with such an unfair hit on mid-and lower-income working families, while he’s giving a £3bn top rate tax cut, we will oppose it, Mr Speaker," Balls said. In response, Osborne declared that Labour would have to explain "to the hard-working people of this country" why it planned to oppose "yet another measure to deal with the deficit".

It is Osborne who starts with the advantage. A YouGov poll at the weekend found that 33 per cent of voters think it was right to limit increases in benefits to 1 per cent, 19 per cent think the government should have gone further and frozen them completely, and 35 per cent think they should have been increased in line with inflation or more.

But Labour believes the Chancellor has miscalculated by announcing a measure that will largely fall on working households. Sixty per cent of those families affected are in work and, according to the Institute for Fiscal Studies, the average one earner couple will be £534 a year worse off by 2015. Expect Labour to also constantly remind the public that Osborne is simultaneously reducing the top rate of income tax from 50p to 45p, a measure that will benefit the average income-millionaire by £107,000. One challenge for the party, however, will be explaining why it opposes a 1 per cent cap on benefit increases but supports a 1 per cent cap on public sector pay.

In an eventful session, Osborne also announced that the 2013 Budget will be held on 20 March.

Labour leader Ed Miliband and shadow chancellor Ed Balls. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Sooner or later, John McDonnell must defend the bankers he hates

The shadow chancellor's message is too complicated to be clear. 

“Like me, you will have friends who voted Conservative,” John McDonnell told an audience of mechanical engineers, Labour faithful and journalists. “They don’t want a bankers’ breakfast – Brexit – any more than I do.”

If the shadow chancellor would subconsciously prefer to talk about fry ups, it might be because the government’s strategy on Brexit has put him in a bind. The man known as a true follower of Marx is increasingly finding himself on the same side as the capitalists. 

In the run up to the EU referendum vote, the Tory Brexiteers leading the Leave campaign talked up a business-friendly, free trading Britain, a Singapore on the North Atlantic, as McDonnell put it in his speech. Labour’s Remain campaigners warned of attacks on workers’ rights.

But then came Brexit, and the economic liberals’ fall from grace. Britain’s new Prime Minister, Theresa May, has steered away from the cosy reassurances once offered to UK Plc and towards the world of the “just managings”. Her Brexit minister, David Davis, hasn’t revealed much about the negotiations, but he has said this: “This Conservative government will not roll back those rights in the workplace.” 

The Tory PM’s focus on controlling immigration and economic fairness will delight many traditional Labour voters. But her apparent complacency about the single market is unnerving economic liberals, and businesses. The most obvious critique of the Prime Minister is that she is willing to risk all-important access to the single market, in order to win on a populist point. 

McDonnell has clearly spotted his. And yet, forced to mount an attack from a free trade position, he sounds conflicted. In his speech on Thursday, he attacked Tory backbenchers who tried to intervene in the Bank of England’s independent monetary policy, and declared: “The economic benefits of free trade are well-known throughout this country.” 

Financial services access is a “red line” in Labour’s negotiation stance. He is prepared to make “a robust economic case” for the benefits of free trade “over the perceived costs of migration”.

Nevertheless, McDonnell’s suspicion of the financial services industry is never far away. His speech was peppered with references to “special deals for bankers”, the “elite” and a “few jobs in the Square Mile”. 

“We have reached the end of the line for the old economic model, with financial services at its centre,” he declared. Instead of a trickle down of wealth, he said, the public had seen “a grotesque trickle up”. 

McDonnell may be bang on in his analysis that economic inequality drove Brexit. He may be right that the economy needs to rebalance towards manufacturing. But that is not what the Brexit negotiations are about. The next two-and-a-half years are about trying to preserve and haggle - and shout the loudest about what the government's priorities should be. And the financial services are central to this. 

Like it or not, we live in a country where services account for nearly 80 per cent of the UK economy, according to the Office for National Statistics, and generate 11.6 per cent of tax receipts. In Scotland, financial services employ nearly 100,000 people. 

The financial services industry is also one of those most jeopardised by Brexit, because it is not a straightforward case of negotiating tariffs. Without passporting rights, UK firms serving the EU are expected to have to establish a subsidiary in the EU. The Institute for Fiscal Studies concluded: “It is clear that the financial services sector is disproportionately affected.”

In other words, the uncertain fate of the financial services industry represents the cold, hard reality of Brexit. The public need to know exactly what the stakes are. McDonnell could be the one to spell this out, and he shouldn't be ashamed by the fact - any more than his Labour predecessors should be for bailing out the banks. But doing so requires mustering up at least a little enthusiasm for financial services. Perhaps he’d better ask his Conservative friends for advice. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.