Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.
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We're only cutting spending to 1964 levels - Balls mocks the Tories' new defence

Shadow chancellor says the Conservatives have blundered by admitting day-to-day spending will be reduced to its lowest level for more than 50 years. 

The biggest of the Labour foxes that George Osborne sought to shoot in his Budget was the line that he's taking public spending "back to the 1930s". After last year's Autumn Statement exposed him to this attack (with the state forecast to shrink to just 35.2 per cent of GDP in 2019-20), the Chancellor announced that expenditure would now stand at 36 per cent: merely the lowest level since 1999-2000. As I noted earlier, this was before any of Labour's major spending increases to health, education and other areas, but it's a more comfortable comparison for the Chancellor than The Road To Wigan Pier

But at his usual post-Budget briefing for lobby journalists, Ed Balls (who I recently profiled) highlighted an OBR table which he said showed "spending on day-to-day public services by 2018 falls to its lowest share of GDP since 1938". Midway through Balls's take, the Tory Treasury Twitter account riposted that spending actually falls to its lowest level since 1964

Labour have since pointed out that the Tories have "clearly misread the OBR’s print. The OBR were referring to the 2019 level when making the claim on 1964." 

The relevant passage in the OBR document states

Relative to the size of the economy, nominal government consumption is forecast to fall from 19.7 per cent of GDP in 2014 to 16.1 per cent of GDP by 2019. This is less of a fall than we forecast in December, but would still leave government consumption as a share of GDP equal to its level in 1964 and would be the joint lowest level in consistent National Accounts data going back to 1948. On a quarterly basis, government consumption falls to 15.9 per cent of GDP at the end of 2018. This is marginally above its previous low of 15.8 per cent, again in 1964.

Alerted to the Tories' ripsote by a journalist, Balls immediately spotted a chance to open a new line of attack. "Is that a boast?" he asked incredulously. "What was the David Cameron thing about too many tweets make a .... too many tweets make a Treasury special adviser would be the way I would put it", he quipped, before clarifying (with his past job in mind): "A Tory Treasury special adviser". 

He concluded: "If I was George Osborne I would have said: 'Don't press send'". A Labour aide later told me: "If the Tories want a row about whether this is the lowest level of day-to-day spending on public services for 50 years or 80 years, it’s fine by us." 

And Balls has another new line to deploy: that there is (in the words of the OBR) "a sharp acceleration" in the pace of spending cuts after 2015-16.  As chart 1.3 of the OBR document makes clear, the planned fiscal tightening dwarfs anything seen in this parliament.

For Cameron and Osborne, who have sought to give the impression that most of the pain is over, it is an uncomfortable truth. Expect Balls to raise it repeatedly between now and election day. "I have to say, I thought George Osborne would try and find ways to change things and he's actually left it all the same," he told journalists. "It was extreme yesterday, it's extreme today and it will be extreme tomorrow."

P.S. Here are Labour's calculations, based on data from the House of Commons library, in full. As they show, spending in 2018 falls to 16.068 per cent of GDP, lower than the 16.073 per cent seen in 1964. 

George Eaton is political editor of the New Statesman.

Photo: Getty
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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.