Balls strengthens his position at Treasury questions

The shadow chancellor enjoyed a better day in the House as he pinned down Danny Alexander on living standards.

After his much-panned response to George Osborne's Autumn Statement, Ed Balls enjoyed a better outing at today's Treasury questions. Noting that Osborne had claimed that living standards were rising (based on the flawed "real household disposable income measure"), but that the IFS had subsequently said that they were falling, he asked Danny Alexander (who stood in for the absent Osborne): "who's right?" After quipping that it was a "pleasure" to see the shadow chancellor in his place and mockingly condemning the "unattributable briefing" against him from the Labour benches, Alexander could only reply that "the whole reason why millions of Britons are under financial pressure is because Labour’s economic mess cost every household in this country £3,000". But while voters might have accepted this line in 2010, they are less likely to do so after three years of stagnation. 

Balls then noted that Osborne was away in Brussels, where "the government is taking legal action to stop a cap on bank bonuses", and asked: "are the Liberal Democrats really right behind the Conservatives on this one too?" Alexander replied by joking that the shadow chancellor had "appointed a new special adviser on hand gestures - Greg Dyke" (a reference to Dyke's cut-throat gesture), adding: "at least that's the gesture his colleagues are making every time they hear him in the House." One was left with the impression that Alexander was more interested in cracking pre-prepared gags than in responding to Balls's questions. 

The shadow chancellor undoubtedly has his critics in Labour. Some MPs believe that he remains too defensive over the record of the last Labour government and too preoccupied with proving that he was right about austerity. Others, on the Blue Labour wing of the party, argue that he is insufficiently committed to Miliband's reformist agenda (one told me that he was a "conventional Brownite" who "doesn't really buy responsible capitalism"). But after his strong performance today and his defiant interview (stating in response to briefing: "I couldn't give a toss") on Sky, the odds on him being replaced as shadow chancellor will lengthen again. As Miliband recognises, there is no one else with the rare combination of political cunning and economic aptitude required to do the job. 

Ed Balls speaks at the Labour conference in Brighton earlier this year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Theresa May gambles that the EU will blink first

In her Brexit speech, the Prime Minister raised the stakes by declaring that "no deal for Britain is better than a bad deal for Britain". 

It was at Lancaster House in 1988 that Margaret Thatcher delivered a speech heralding British membership of the single market. Twenty eight years later, at the same venue, Theresa May confirmed the UK’s retreat.

As had been clear ever since her Brexit speech in October, May recognises that her primary objective of controlling immigration is incompatible with continued membership. Inside the single market, she noted, the UK would still have to accept free movement and the rulings of the European Court of Justice (ECJ). “It would to all intents and purposes mean not leaving the EU at all,” May surmised.

The Prime Minister also confirmed, as anticipated, that the UK would no longer remain a full member of the Customs Union. “We want to get out into the wider world, to trade and do business all around the globe,” May declared.

But she also recognises that a substantial proportion of this will continue to be with Europe (the destination for half of current UK exports). Her ambition, she declared, was “a new, comprehensive, bold and ambitious Free Trade Agreement”. May added that she wanted either “a completely new customs agreement” or associate membership of the Customs Union.

Though the Prime Minister has long ruled out free movement and the acceptance of ECJ jurisdiction, she has not pledged to end budget contributions. But in her speech she diminished this potential concession, warning that the days when the UK provided “vast” amounts were over.

Having signalled what she wanted to take from the EU, what did May have to give? She struck a notably more conciliatory tone, emphasising that it was “overwhelmingly and compellingly in Britain’s national interest that the EU should succeed”. The day after Donald Trump gleefully predicted the institution’s demise, her words were in marked contrast to those of the president-elect.

In an age of Isis and Russian revanchism, May also emphasised the UK’s “unique intelligence capabilities” which would help to keep “people in Europe safe from terrorism”. She added: “At a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty. We are leaving the European Union, but we are not leaving Europe.”

The EU’s defining political objective is to ensure that others do not follow the UK out of the club. The rise of nationalists such as Marine Le Pen, Alternative für Deutschland and the Dutch Partij voor de Vrijheid (Party for Freedom) has made Europe less, rather than more, amenable to British demands. In this hazardous climate, the UK cannot be seen to enjoy a cost-free Brexit.

May’s wager is that the price will not be excessive. She warned that a “punitive deal that punishes Britain” would be “an act of calamitous self-harm”. But as Greece can testify, economic self-interest does not always trump politics.

Unlike David Cameron, however, who merely stated that he “ruled nothing out” during his EU renegotiation, May signalled that she was prepared to walk away. “No deal for Britain is better than a bad deal for Britain,” she declared. Such an outcome would prove economically calamitous for the UK, forcing it to accept punitively high tariffs. But in this face-off, May’s gamble is that Brussels will blink first.

George Eaton is political editor of the New Statesman.