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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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland