Why the return of growth doesn't prove that Balls was wrong

The shadow chancellor never said that there would be no recovery, only that it would be painfully slow. And he was right.

When the GDP figures are published tomorrow morning at 9:30am, the cry will go up from the Tories and their media allies that Ed Balls's credibility has been destroyed. They might not like Ed Miliband, but they reserve a special animus for the shadow chancellor. For them, the return of growth proves that Balls's critique of George Osborne's austerity programme was fundamentally wrong; Labour will not be taken seriously until he is thrown overboard. 

If Balls is such a liability to his party, one wonders why so many Conservatives exert so much energy calling for his departure (the answer, as some privately acknowledge, is that he is one of Labour's greatest assets). But put this Machiavellian gamesmanship to one side, the claim that it is Osborne, not Balls, who has been vindicated doesn't bear scrutiny. 

Contrary to the right, Balls never said that there would be no recovery, only that it would be painfully slow. On this point he was entirely right. The return of growth after three years of stagnation is nothing to celebrate. As Balls writes today, "we would need 1.4 per cent growth in each and every quarter between now and the election simply to catch up all the ground lost since 2010." Even if we learn tomorrow that the economy grew by 1% in the third quarter, output will still be 2.3% below its pre-recession peak. In the US, by contrast, where the Obama administration maintained fiscal stimulus, the economy is 3.2% larger than in 2007. Growth of 1% in Q3 would mean that the economy has expanded by just 2.8% since autumn 2010, compared to the 7.7% forecast by the OBR. 

Not all of this can be blamed on Osborne. The continued fragility of the banking sector, the rise in global commodity prices and the eurozone crisis have all constrained growth. But it is precisely for these reasons that wise minds counselled the Chancellor against austerity. As Balls warned in his celebrated Bloomberg speech in 2010, Osborne was "ripping out the foundations of the house just as the hurricane is about to hit". Hippocrates’s injunction to "first, do no harm" should have been his watchword. Instead, with the private sector already contracting, he chose to tighten the squeeze. We are still paying the price today. The double-dip may have been revised away (growth was 0% in Q1 2012 rather than -0.1%; only an economic illiterate would celebrate that) but the austerians didn't only  promise that Britain would avoid another recession, they promised, in the words of Osborne's first Budget, "a steady and sustained economic recovery". What we got was the slowest recovery for more than 100 years. 

Then there is the claim that Labour is only now talking about living standards in a desperate attempt to distract attention from the macroeconomy. As Tim Montgomerie writes in today's Times, "The Opposition won’t acknowledge the recovery but it’s interesting to note what Labour politicians have stopped saying. Ed Balls isn’t talking about a double dip any more. Ed Miliband isn’t calling for the abandonment of Plan A. Labour has moved the goalposts and now talking about the cost of living crisis — a genuine challenge but a different one."

Yet it was on the day after his election as Labour leader that Ed Miliband first used the phrase "the squeezed middle" and it was in February 2011, a few weeks after being appointed as shadow chancellor, that Balls first spoke of a "cost of living crisis". Three months later, in a speech at the LSE, he argued: 

[T]he test for the Treasury isn't just whether they can post better growth rates - we all know the economy will return to stronger growth eventually - it's whether they can make up all this lost ground in jobs and living standards

It is precisely because the recovery has been so weak that real wages have fallen for the longest peirod since 1870. As Osborne himself noted in his conference speech, the cost of living cannot be detached from "the performance of the economy". Rising GDP is no longer a guarantee of rising wages (the point Labour is rightly emphasising) but the near-absence of growth for three years explains why British workers have suffered more than most. Since mid-2010, average hourly wages have fallen by 5.5%, a faster rate of decline than every EU country except Portugal, the Netherlands and Greece. For Osborne to now lecture others on the importance of growth to living standards takes chutzpah to a new level. Wages have fallen for 39 of the 40 months that Osborne has sat in the Treasury (the exception being April 2013 when deferred bonuses were paid out following the abolition of the 50p tax rate).

The living standards crisis wasn't an unavoidable coincidence of the lack of growth, but an inevitable consequence. Before the Tory spin machine whirls into action tomorrow, it's worth remembering this. 

Ed Balls and George Osborne attend the State Opening of Parliament, in the House of Lords at the Palace of Westminster in London May 8, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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It's Gary Lineker 1, the Sun 0

The football hero has found himself at the heart of a Twitter storm over the refugee children debate.

The Mole wonders what sort of topsy-turvy universe we now live in where Gary Lineker is suddenly being called a “political activist” by a Conservative MP? Our favourite big-eared football pundit has found himself in a war of words with the Sun newspaper after wading into the controversy over the age of the refugee children granted entry into Britain from Calais.

Pictures published earlier this week in the right-wing press prompted speculation over the migrants' “true age”, and a Tory MP even went as far as suggesting that these children should have their age verified by dental X-rays. All of which leaves your poor Mole with a deeply furrowed brow. But luckily the British Dental Association was on hand to condemn the idea as unethical, inaccurate and inappropriate. Phew. Thank God for dentists.

Back to old Big Ears, sorry, Saint Gary, who on Wednesday tweeted his outrage over the Murdoch-owned newspaper’s scaremongering coverage of the story. He smacked down the ex-English Defence League leader, Tommy Robinson, in a single tweet, calling him a “racist idiot”, and went on to defend his right to express his opinions freely on his feed.

The Sun hit back in traditional form, calling for Lineker to be ousted from his job as host of the BBC’s Match of the Day. The headline they chose? “Out on his ears”, of course, referring to the sporting hero’s most notable assets. In the article, the tabloid lays into Lineker, branding him a “leftie luvvie” and “jug-eared”. The article attacked him for describing those querying the age of the young migrants as “hideously racist” and suggested he had breached BBC guidelines on impartiality.

All of which has prompted calls for a boycott of the Sun and an outpouring of support for Lineker on Twitter. His fellow football hero Stan Collymore waded in, tweeting that he was on “Team Lineker”. Leading the charge against the Murdoch-owned title was the close ally of Labour leader Jeremy Corbyn and former Channel 4 News economics editor, Paul Mason, who tweeted:

Lineker, who is not accustomed to finding himself at the centre of such highly politicised arguments on social media, responded with typical good humour, saying he had received a bit of a “spanking”.

All of which leaves the Mole with renewed respect for Lineker and an uncharacteristic desire to watch this weekend’s Match of the Day to see if any trace of his new activist persona might surface.


I'm a mole, innit.