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If not Brown, is it Balls?

The Schools Secretary needs to be more of a team player if he is not to alienate his colleagues and

Ed Balls doesn’t do “off message” these days. When Tony Blair was prime minister, Balls frequently briefed against No 10 – often on behalf of Gordon Brown next door at No 11. But now, as Brown’s most zealous ally and enforcer, he never says anything out of line with the thinking at the top of government.

That is why when Balls privately expressed doubts to journalists about Alistair Darling's judgement last summer, after the Chancellor had announced that economic conditions were "arguably the worst they have been in 60 years", the briefings were felt so keenly by Darling. Not only had he thought the two men were allies - he felt "very let down" by Balls, according to one confidant - but the criticism suggested the Chancellor may have fallen out of favour with the Prime Minister, too.

In contrast to Darling's pessimistic assessment, the Prime Minister had been saying, since May last year, that the economy could be turned around in the following six months. A slump could be averted. In the event, Darling was right and Brown and his henchmen were wrong. So Darling can be forgiven for being surprised at what the Liberal Democrats' Vince Cable called the "doom-laden picture of Armageddon" painted by Balls on 7 February.

Speaking to a Yorkshire Labour conference at the Hilton hotel in Sheffield, Balls said: "The reality is this is becoming the most serious global recession, I am sure, for over 100 years . . . I think this is a financial crisis more extreme and more serious than that of the 1930s."

Balls may have felt that he was at a private meting and talking off the record and that his dramatic comments would not be reported (they weren't, nationally, until three days later). But either way, the real significance of his candour does not lie in their substance. Rather, the comments provide evidence of an acceptance inside No 10 that the economy will not turn around this year, and that the next general election - now certain to be in 2010 - will be fought against the backdrop of a possible depression. (With this in mind, it is questionable just how much a "slip of the tongue" it was when Brown used the word "depression", only to correct himself with "recession", at Prime Minister's Questions early this month.)

Some Labour sources say that Brown has now developed a concerted strategy to allow aides and ministers to prepare the media and the wider public for the gravity of the economic crisis - belatedly, but still a year in advance of an election. That way, the election can be fought as a recession (or depression) referendum, and the opposition will not be able to claim the government is in denial about the extent of the crisis. The plan is complicated by Kenneth Clarke's return to the Tory front bench as shadow business secretary, but Labour still intends to portray the choice as being between "serious people for serious times" - Brown, Darling, Peter Mandelson - and the inexperienced David Cameron and George Osborne.

Balls’s aides claim that he has a noble motive for wanting to be chancellor

There is another factor behind Balls's position on the economy: the ambitious Secretary of State for Children, Schools and Family ultimately has his eye on the Labour leadership and No 10. To help him get there, he wants Darling's job. When Brown was at his lowest point last summer, Balls saw his position would be threatened if his mentor was removed from office either by a leadership challenge or a general election defeat. Not the most popular minister in the cabinet, Balls knew that under any other leader - such as David Miliband - his rapid rise might come to a halt. So he began lobbying Brown for promotion to the Treasury, an ideal platform from which to mount a leadership bid.

Some of his critics allege that Balls was somehow behind the bizarre late-night briefings at last year’s Labour

conference by Brown’s former spin doctor Damian McBride: Ruth Kelly, it was whispered, was about to resign from the cabinet. The theory, however improbable, is that Balls was trying to “trigger” a reshuffle in which he would

become chancellor. Whatever the truth of that rumour, the lobbying has continued, even after the appointment of Mandelson as Business Secretary, which reduced Balls’s influence with Brown to its lowest level for a decade. Balls was the one minister to argue with Brown against Mandelson’s recall, contending – even in public – that it was a “risk”; but Brown ignored his advice.

Balls has since enjoyed something of a reconciliation with Mandelson, even if Mandelson's return was frustrating for him, and he remains as combative as ever. In a cabinet row over Heathrow's proposed third runway, ministers shuffled in their seats as Balls "savaged" - the word of one insider - Ed Miliband over his opposition to the plan. The Climate Change Secretary, said Balls, was threatening Labour voters' jobs.

The exchange was all the more troubling because the two men were once friends as well as allies. Ed Miliband used to describe himself as "the other Ed" as well as "the other Mili­band". Now the younger Miliband is seen by many in Labour as a strong leadership contender in his own right, which is perhaps partly why Balls has fallen out with him. The contest among the next generation has begun, even if the starting pistol has not officially been fired. Balls is not necessarily in pole position, a fact he realises and has been making attempts to remedy. Along with James Purnell, the Work and Pension Secretary, who remains less certain that he wants the disruption to his life that the leadership would involve, Balls has been making an effort on the "rubber chicken" circuit of Labour constituencies in recent months; the former Financial Times journalist is seeking to become as popular with the party's grass roots as he is with Westminster political editors.

Balls’s aides claim that he has a more noble motive for wanting the chancellorship. He believes, they say, that the Treasury is too “conservative” and needs an injection of “radicalism” and “imagination” of the sort that Barack Obama has shown, most recently with the $500,000 pay cap for executives of bailed-out banks and firms.

It was notable that during Balls's defence of his remarks in Yorkshire, he repeatedly referred to how the US president is campaigning across America for a strong fiscal stimulus. Balls's friends say he has been saying privately since Christmas that the Treasury is not thinking boldly enough, is not ahead of the curve.

As economic adviser to Brown from 1994 to 1999 and as chief economic adviser to the Treasury from 1999 to 2004, and then as economic secretary to the Treasury between 2006 and 2007, Balls helped mastermind some of Labour's most innovative policies, such as granting independence to the Bank of England.

As Schools Secretary since 2007, he has confounded his Blairite critics by backing the controversial city academy scheme set up by Lord Adonis, Blair's zealously reform-minded schools minister. At the same time he has sought to raise standards and drive unprecedented investment in the state sector, as well as rolling out Labour's successful Sure Start scheme to encourage early learning - a crucial election battleground of policy opposed by the Conservatives.

But Balls might now reflect on Darling's plight last summer, after the Chancellor was attacked for delivering his own - now relatively modest - assessment of economic conditions. Many in government see the attempt by some Brownites to undermine Darling as not only unfair, but irresponsible. Had Darling been removed in the midst of a crisis there would undoubtedly have been repercussions in the markets. The elevation of Balls would have been good for Balls but (some say) bad for confidence in the government.

Similarly, picking a fight with Ed Miliband, who is popular with the party's grass roots, was arguably unwise. The talented Climate Change Secretary may have opposed the government's position, but that he genuinely also wants what is best for Labour is not in doubt.

Ed Balls remains a formidable and commandingly intelligent figure. Like both Milibands, Brown, Darling and, for that matter, Mandelson, he is passionate about Labour and is in politics for the right reasons. Unless he can develop a more collegiate and slightly less confrontational style, however, the danger for him is that he may end up alienating the Labour Party he believes it is his destiny to lead.

Ed Balls: the CV

Born 25 February 1967 in Norwich

Educated at Nottingham High School before studying PPE at Keble College, Oxford, and then attends Harvard University as a Kennedy Scholar

1990: Leader writer for the Financial Times

1994-99: Serves as economic adviser to Gordon Brown, during which period he writes a speech for the then shadow chancellor using the phrase "post-neoclassical endogenous growth theory". This provokes the Tory grandee Michael Heseltine to retort: "It's not Brown's. It's Balls"

1998: Marries Yvette Cooper, MP for Pontefract and Castleford. They have three children

1999: Chief economic adviser to the Treasury

2004: Steps down from the Treasury to contest the Normanton parliamentary seat. Becomes MP for the constituency, which neighbours his wife's, in the May 2005 general election

May 2006: Becomes economic secretary to the Treasury

June 2007: Promoted to the post of Secretary of State for Children, Schools and Families in Brown's first cabinet. Yvette Cooper also joins the cabinet as minister for housing

February 2009: Tells a Yorkshire Labour conference in Sheffield the global recession will be the "most serious for over 100 years"

Michael Harvey

James Macintyre is political correspondent for the New Statesman.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression