Chancellor George Osborne during a meeting of G7 finance ministers on May 28, 2015 in Dresden. Photograph: Getty Images.
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Osborne's budget surplus trap will force Labour to finally offer economic clarity

The party will need to decide whether to make the case for investment or to embrace fiscal conservatism. 

Like Gordon Brown before him, George Osborne delights in laying traps for his political opponents. His proposed new budget surplus law, which will force future governments to pay down debt "in normal times", is a classic of the genre. Having conceded, to varying degress, that Labour should not have run a deficit before the crash, the party's leadership candidates will now be challenged to say whether they support the Chancellor's measure. Should they vote in favour of the plan, Labour will be forced to pledge to fund new investment through higher taxes, allowing the Tories to run a 1992-style "bombshell" campaign, or commit to even deeper cuts in current spending.

There is no policy merit in Osborne's proposal. Governments can currently borrow at ultra-low rates to fund growth-stimulating infrastructure projects. But Osborne, a fiscal dogmatist, is determined not to take advantage of this historic opportunity. To extend his favoured household analogy, he has declined to take out a national mortgage even when offered exceptionally generous terms. While it is prudent for governments to run surpluses in times of growth (as a reserve fund against economic shocks), it is not always possible or even desirable. Only in seven of the last 50 years has the UK done so (including three times during Brown's chancellorship). Should the private sector be unwilling or unable to invest, the state must intervene as a spender of last resort. 

Labour will wait to see the detail of the Chancellor's proposal in the Budget on 8 July before saying whether it will support or oppose the policy (most crucially, the definition of "normal times"). Shadow chancellor Chris Leslie said: "We need to deal with the deficit, and no-one would disagree with a surplus when economic circumstances allow or that investment is needed if the economy is in a downturn. But rather than giving speeches full of distraction techniques the Chancellor should be focusing on driving up productivity, setting out how he will pay for his multi-billion-pound election pledges and explaining who will bear the burden of the still unexplained cuts planned.

"Sensible reductions in public spending and a balanced approach are needed - but the public need straight answers from the Chancellor now rather than politics."

But assuming it does not abstain from voting, it will need to take a side. This will force it to confront the unresolved dilemmas of Ed Miliband's leadership. While sensibly leaving room to borrow to invest, Labour almost never made the case for doing so, for fear of deepening its profligate reputation. But this policy stance, along with its failure to tackle the "overspending" question, also made it an unconvincing advocate for fiscal conservatism. If Osborne's gambit forces it to finally offer clarity, rather than ambiguity, it may yet have something to thank him for. 

George Eaton is political editor of the New Statesman.

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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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