Why Labour can't and won't go on a "spending spree"

Balls has left himself with room to borrow to invest but the party's fiscal rules mean total spending will be falling for almost every year of the next parliament.

Was Ed Balls's latest commitment to fiscal responsibility just smoke and mirrors? That's the suggestion on the front of today's Times, which declares "Labour’s spending spree to cost £25bn". The paper reports that the party has "quietly drawn up spending plans that would allow it to borrow £25 billion more than the Tories after the next election, despite promising to match George Osborne’s pledge of clearing the deficit.

"A 'sleight of hand' by Ed Balls means he would be able to slow the pace of public cuts proposed by the Tories, opening up a further ideological divide between the two parties."

This refers to the fact that while pledging to eliminate the current budget deficit by the end of the next parliament, Labour has left itself with room to borrow for capital spending (unlike George Osborne, who has vowed to achieve an absolute budget surplus by 2020 at the latest). Judging by the Times's report, you might assume that Balls had hidden this fact. But the reverse is the case. Labour isn't matching the Conservatives' pledge to eliminate the total deficit and Balls was careful not to suggest otherwise. As he said in his speech at the Fabian Society conference last weekend, 

I am today announcing a binding fiscal commitment. The next Labour government will balance the books and deliver a surplus on the current budget [emphasis mine] 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 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.

There was no "sleight of hand". 

Most of the media didn't bother to distinguish between current (day-to-day spending on public services, e.g. teachers' salaries and hospital drugs) and capital spending (investment in assets such as housing and roads) but the difference was there for those paying attention. 

Labour's position remains that it will make a formal decision on whether to borrow for capital spending closer to the election when economic circumstances are clearer. 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."

So while there has been no deception from Balls, is he still planning a "spending spree" if he's back in the Treasury after May 2015? Again, the answer is no. As well as promising to eliminate the current budget surplus, Balls has also pledged to ensure "falling national debt" (as a proportion of GDP) in the next parliament. This second fiscal rule, which includes both current and capital expenditure, means that Labour won't be able to "spend like drunken sailors" regardless of what some on the left would wish. Total spending, the lion's share of which is current expenditure, will be falling for the majority of the next parliament. As the Times's own Daniel Finkelstein noted in his column yesterday, Labour is now committed to "a very difficult period of deficit reduction". Has the party left itself with room to spend more than the Tories? Absolutely. But there will be nothing resembling a "spending spree".

Of course, were there to be another financial crisis or a similar disaster, it's possible that Labour would abandon one or both of its fiscal rules (as Gordon Brown did in 2008 and as George Osborne did in 2012) but that wouldn't be a spending spree but an acknowledgment of economic reality. 

That the Times has taken none of the above into account has infuriated the party this morning. Labour has long been angered by what it views as the paper's increasingly partisan coverage under new editor John Witherow (a front page last year declaring "Labour engulfed by Co-op scandal" provoked particular ire) and today's splash will only worsen relations. 

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

George Eaton is political editor of the New Statesman.

Felipe Araujo
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Hull revisited: What happens when a Brexit stronghold becomes City of Culture?

We report from Hull, to find out if you can replace the kind of nostalgia that led to a Leave vote with cultural investment.

At 75 metres long, the offshore wind turbine blade erected across Queen Victoria Square, in the heart of Hull, is a sculpture intended to mark a new chapter in the city’s history. For the next 12 months, Hull, a city of more than a quarter of a million people in the northeast of England, will be the UK’s City of Culture.

The 28-tonne blade hails from the local Siemens plant. The German technology company employs around 1,000 people in the area, making it Hull’s biggest single employer.

Seen up close in this context – laid dormant in the middle of a town square instead of spinning up in the air generating energy – the structure is meant to remind passersby of a giant sea creature. It is also, I’m told, an allusion to Hull’s rich maritime history.


All photos: Felipe Araujo

Nostalgia is a big thing in this part of the country. At one point, Hull was the UK’s third largest port but technology and privatisation drastically changed that. The battle over cod fishing with Iceland in the waters of the North Sea 40 years ago has also dealt a major blow to a region with a long and proud trawling tradition.

People here still talk about a bygone era when the fishing industry provided jobs for everyone and there was enough money to go around.

Fast forward to 2017, and the country’s new capital of culture is the same city that voted 67 per cent in favour of leaving the EU last June. Its new-found prestige, it seems, is not enough to erase years of neglect by a political class “too busy for commoners like us”, as one resident puts it.

“More than a message to Brussels, it [the Brexit vote] was a message to Westminster,” Paul Leeson-Taylor, a filmmaker born and bred in Hull, tells me. “For the first time in a long time people in Hull felt like they had the chance to change something, and they took it.”

But while speaking to people on the high street and hanging out with locals at the Community Boxing Club in Orchard Park, one of the city’s most deprived areas, there is one word that consistently popped up in conversation – more than any specific policy from Westminster or the much-hated rules “dictated” by Brussels. Foreigners.

According to official figures, Hull’s population is 89.1 per cent white British. Still, immigration is big on people’s minds here.

During my two-day stay in the city, I find myself being the only black person in most places I visit – I’m certainly the only black guy at the boxing club. So when someone begins a sentence with “I’m not racist but…”, I know a tirade on immigrants is about to ensue.

“There are just too many of them,” Nick Beach, an estate agent whose Polish clientele is a big part of his business, tells me as he is about to teach a boxing class to local children. Beach was born in Shepherd’s Bush, in West London, but has been living in Hull for the last 20 years.

“When I go down there these days and go into Westfield shopping centre, it is very rare you get an English person serving you now,” he says. “I just find it disappointing that you go into your capital city and you are a minority there.”

These are the much-discussed “left behind”, a white working-class community that has gained particular prominence in a time of Brexit and Donald Trump. Under economic pressure and facing social change, they want to have their say in running a country they claim to no longer recognise.

For Professor Simon Lee, a senior politics lecturer at the University of Hull, immigration is only a superficial layer when it comes to explaining the resentment I witness here. For him, the loss of the empire 70 years ago is still something that as a country Britain hasn’t come to terms with.

“The reason for us to be together as a United Kingdom has gone, so what is the project?”

As destiny would have it, a foreign company will now play a major role on Hull’s economic future, at least in the short term. In the wake of the Brexit vote, there were widespread fears Siemens would pull out of the region and take its factory elsewhere. With the massive blade looming large in the background, Jason Speedy, director of the blade factory in Hull, assures me that isn’t the case.

“The Brexit decision has made no difference. We have made our investment decision, so Siemens, together with the Association of British Ports, has put in £310m. It’s all full steam ahead.”

As Hull becomes the country’s cultural hub for the next few months, the hope is that its residents stop looking back and start looking forward.

For Professor Lee, though, until there is a complete change in the power structures that run the country, the north-south divide will remain – with or without the EU. “The way you kill nostalgia is to have something new,” he said. “The reason why people here are nostalgic is because there is nothing to replace it with.”

Felipe Araujo is a freelance journalist based in London. He writes about race, culture and sports. He covered the Rio Olympics and Paralympics on the ground for the New Statesman. He tweets @felipethejourno.