Balls is waking the left up to a grim truth: Labour would cut too

Not only will Labour be unable to reverse the coalition's cuts, it will have to make its own.

As I reported last night, the major announcement in Ed Balls's speech on the economy today is that Labour would remove the winter fuel allowance from the wealthiest 5 per cent of pensioners. The policy is intended as an example of the "iron discipline" on spending that the shadow chancellor would pursue in office and is designed to exploit the division between the Tories and the Lib Dems on this issue. But as spending cuts go, it's small beer. The move will save just £100m a year (less than half a per cent of the £207bn welfare bill), making it almost entirely symbolic. "Labour have brought a pea-shooter to a bazooka fight", quipped Conservative Voice this morning. 

But that shouldn't detract from the political significance of the decision. As recently as January, Ed Miliband defended universal benefits (including the WFA) as part of the "bedrock of our society" but with his support for means-testing winter fuel payments, the Labour leader has dramatically changed tack. While shadow Treasury minister Chris Leslie insisted on the Today programme this morning that Labour had no plans to remove other benefits such as free TV licences and free bus passes from wealthy pensioners, the decision to break with universalism will make it easier to justify doing so in the future. It is also a signal that a Labour government would not prioritise the reintroduction of universal child benefit, removed by the coalition from those earning £50,000 or more earlier this year.  

Balls has long acknowledged that he won't be able to reverse all (or any) of the cuts imposed by the current government (to the fury of the left), but he's had much less to say about the further cuts that Labour would almost certainly have to make in office. Based on the most recent forecasts from the Office for Budget Responsibility, the party will inherit a deficit of £108bn, or 5.9 per cent, the largest of any western nation. While Labour is likely to opt for a more even split between tax rises and cuts than Osborne (who has adopted an 80:20 ratio in favour of cuts), the burden of austerity will still fall on government spending. For that reason, the most significant passage in Balls's speech today is this: 

[T]his is the hard reality. The last Labour government was able to plan its 1997 manifesto on the basis of rising departmental spending in the first years after the election. The next Labour government will have to plan on the basis of falling departmental spending. Ed Miliband and I know that, and my shadow cabinet colleagues know that too.

With the election less than two years away, Balls is gradually waking the left up to the grim truth that I mentioned earlier: not only will Labour be unable to reverse the coalition's cuts, it will have to make its own. Means-testing the winter fuel allowance might seem bad, but much worse is to come.

While emphasising the need for fiscal responsibility, Balls is rightly continuing to make the case for stimulus now. In his speech, he will call for Osborne to bring forward the capital spending increase promised after 2015 in order to boost growth and employment. Were the Chancellor to follow his advice, Labour's economic inheritance would become less grim. But, to put it mildly, recent history suggests that he is unlikely to do so. With this in mind, Balls has embarked on a gigantic softening-up exercise. And the battles to come will make today's skirmish look like a tea party. 

Ed Miliband and Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

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