Balls's surplus pledge leaves Labour with room to borrow to invest

Unlike Osborne's budget surplus pledge, Balls's only applies to current spending, leaving open the option of borrowing to fund infrastructure.

In his speech tomorrow at the Fabian Society conference, Ed Balls will commit Labour to achieving a current budget surplus in the next parliament. He will say:

I am today announcing a binding fiscal commitment. The next Labour government will balance the books and deliver a surplus on the current budget and falling national debt in the next Parliament. So my message to my party and the country is this: where this government has failed, we will finish the job.

We will abolish the discredited idea of rolling five year targets and legislate for our tough fiscal rules within 12 months of the general election. Tough fiscal rules which will be independently audited by the Office for Budget Responsibility.

We will get the current budget into surplus as soon as possible in the next Parliament. How fast we can go will depend on the state of the economy and public finances we inherit.

At first sight, this might appear identical to the recent pledge by George Osborne to run a surplus by the end of the next parliament (in 2018-19 at present). But there is one crucial difference. While Osborne's promise applies to total government spending, Balls's only applies to current spending (day-to-day spending on public services, for instance teachers' salaries and hospital drugs). This leaves open the option of Labour borrowing to fund additional capital spending (investment in assets such as housing and roads). A Balls source told me tonight that the party would wait until closer to the election, when economic circumstances are clearer, before deciding whether to do so.

As Balls said in my recent interview with him, "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."

In adopting this stance, Balls has revived the "golden rule" favoured by his mentor Gordon Brown, which stated that "over the economic cycle the government will borrow only to invest and that current spending will be met from taxation" (or, in these austere times, from cuts elsewhere. The big question for Labour is what balance the party will adopt betwen tax rises and cuts).

This is undoubtedly the right policy decision but expect the Tories to respond by declaring that it destroys Labour's ostensible commitment to fiscal responsibility by creating the possibility of "more borrowing". Labour sources are keen to point out that the accompanying pledge to reduce the national debt as a share of GDP means that the party won't be able to ramp up capital spending to unsustainable levels but the onus will be on it to make the case for investment if it chooses to borrow. Polls show that a majority of voters are in favour of borrowing more to fund spending in areas such as housing but, for fear of being portrayed as profligate, Labour has yet to win this argument with the Tories.

While it's Balls's surplus pledge that will dominate discussion tonight, I'm told that the speech will not be solely focused on the deficit and will include more on the reshaped economy promised by Ed Miliband in his speech last week; there will be one new unbriefed announcement.

P.S. If you're going along to the Fabian conference, I'll be speaking at 1:45pm on "who will win in 2015?"

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

George Eaton is political editor of the New Statesman.

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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