Balls's IMF response shows Labour's spending priorities

If the party does borrow for investment after 2015, it will be childcare, jobs and housing that benefit.

During the period when the economy was flatlining, Ed Balls used to respond to anaemic growth forecasts by calling on George Osborne to adopt his "five-point plan" to stimulate jobs and growth, including a cut in VAT to 17.5 per cent, a one-year National Insurance tax break for small firms, a repeat of the bank bonus tax to build 25,000 affordable homes and guarantee a job for 100,000 young people, accelerated infrastructure spending on schools, roads and transport, and a one-year cut in VAT on home improvments, repairs and maintenance. Had Osborne taken his advice, the UK would almost certainly be in a better position than it is now (output remains 2 per cent below its pre-recession peak and real wages, contrary to what David Cameron claimed at last week's PMQs, are still falling). 

But with a recovery finally underway (albeit the wrong kind of recovery), Balls's focus his shifted from short-term stimulus to long-term investment. In response to the IMF's upgrading of its growth forecast for the UK in 2014 from 1.9 per cent to 2.4 per cent, he said: 

After three damaging years of flatlining, any growth is both welcome and long overdue. But this is the slowest recovery for 100 years and working people are facing a cost-of-living crisis with real wages now down £1600 a year under David Cameron.

With business investment still weak and the IMF forecasting that UK growth will slow down again next year, it’s clear that this is not yet a recovery that is built to last. Simply to catch up all the lost ground since 2010 we need 1.5 per cent growth each quarter between now and the election.

Instead of more complacency from George Osborne we need Labour’s plan to secure a stronger recovery and earn our way to higher living standards for the many, not just a few at the top. That means reforms to our banks and energy market, expanding free childcare to make work pay, a compulsory jobs guarantee and a plan to build 200,000 new homes a year.

The last paragraph is particularly worth noting. While Balls has pledged that there will be no more borrowing for day-to-day spending in 2015-16, he has left open the option of borrowing for investment (capital spending). Should Labour pursue this course, it is the areas Balls cites - childcare, jobs and housing - that will benefit. Shadow childcare minister Lucy Powell, Ed Miliband's former deputy chief of staff (and an MP to watch), has smartly redefined childcare as an "infrastructure priority" in order to bolster the case for investment. As she wrote on The Staggers last year

While early years education is vital for child development and early intervention, childcare should be seen by government as an issue for business and a key infrastructure priority to promote growth and get people back to work, linking in with BIS responsibilities for flexible working and shared parental leave. That’s why I’m proposing that a future Labour government should have a Childcare and Early Years Minister with cross-departmental responsibilities in the Department for Business, Innovation and Skills and the Department for Education coordinating support for working parents across government including working with Ministers in the Treasury and Department for Work and Pensions. Support for families should be shaped by what parents need rather than falling between the silos of government. Ensuring good quality early years education and child development goes hand in hand with getting the quality parents want to have so they feel happy leaving their children to return to work.

When I asked Balls during my recent interview with him whether Labour would borrow for investment, he told me: "In the speech I gave at Reuters in the summer, I said, and Ed and I both said, that’s a decision we should make much closer to the election when we’ve got more information about what the state of the economy is going to be. So we’ve been very clear, no more borrowing for day-to-day spending, but on the capital side that’s something that we’re going to continue to look at. I’m not going to rule it out, but I’m also not going to say now that it’s definitely the right thing to do."

While Balls is likely to come under greater pressure to confirm Labour's intentions as the year goes on, it's worth remembering that Gordon Brown waited until the start of 1997 before announcing his fiscal rules. In less benign economic circumstances, Balls and Miliband may not show their hand until 2015. 

Ed Balls speaks at the CBI conference in London last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Former Labour leader Ed Miliband tells Jeremy Corbyn: "I would have gone"

Jeremy Corbyn's predecessor broke his long silence to say the leader's position was "untenable". 

The former Labour leader Ed Miliband has swung his weight behind the campaign to oust Jeremy Corbyn after describing his position as "untenable" and declared he would have resigned already.

His intervention is seen as significant, because since losing the general election in 2015, Miliband has taken a step back and refused to publicly criticise his successor. 

But the day after Labour MPs voted they had no confidence in Corbyn, the former leader has finally spoken. 

Miliband told BBC Radio 4's World at One that his position was "untenable". 

He said:

"We are at a time of acute national crisis, a crisis I haven't known in my political lifetime, probably the biggest crisis for the country since World War II.

"At that moment we in the Labour party need to think about the country.

"I've supported Jeremy Corbyn all the way along from the moment he was elected because I thought it was absolutely the right thing to do. A lot of what he stands for is very important. But I've relcutantly reached the conclusion that his position is untenable."

 

But with Corbyn already defying the opinion of most of his parliamentary colleagues, this alone is unlikely to have much effect. It's what Miliband says next that is crucial.

Corbyn has argued the vote of no confidence against him was unconstitutional. Miliband thinks otherwise. He said: "You are the leader of the Labour Party, the leader of the party in parliament and the leader of the party in the country. Some people are saying this is unconstitional. In our constitution it says if a fifth of MPs support another candidate there is another contest."

And he implied it should not even get to a leadership contest: "No doubt that will follow if Corbyn decides to stay. but the question then for him is what is the right thing for the country and the party and the causes he stands for."

Miliband also hit out at accusations of a conspiracy to oust Corbyn:

"I've never been called a Blairite. I'm not a plotter. I'm somone who cares deeply anpout this country, deeply about my party, deeply about the causes I think Jeremy and I care about. I think the best thing on all of those criteria is that he stands down."

Asked what he would have done in the same situation, he replied: "I would have gone.

"One of the reasons I'm speaking out is because of what people are saying about this proceess. If you look at the people saying Jeremy should go, it's not people on one wing of the Labour Party.

"I had my troubles with certain people in the Labour Party. Some of them ideological, some on other issues, but this is not ideological." Some of Corbyn's ideas could continue under a new leader, he suggested. 

Miliband shared his views just minutes after his former rival, the Prime Minister David Cameron, told Corbyn it was not in the national interest for him to remain as leader. "I would say, for heaven's sake man, go," he told the Opposition leader at Prime Minister's Questions. 

Although the Brexit vote was a devastating blow for the PM, the aftermath has unleashed equal waves of turmoil for the Labour Party.

Corbyn's refusal to resign sparked a series of resignations from the shadow cabinet. Unmoved, he replaced them. Meanwhile Momentum, Corbyn's grassroots political organisation, held a rally in support outside Parliament. 

On Tuesday, Labour MPs voted 172 to 40 in favour of a no confidence motion, which paves the way for a leadership challenge.

But Corbyn described the vote as unconstitutional and pledged he "would not betray" the Labour Pary members, who gave him a sweeping mandate in 2015.