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12 July 2010

Ed Balls declares: Labour’s cuts would have been too savage

Balls is right. Labour’s spending plans would have meant cuts of 20 per cent.

By George Eaton

The coalition may be planning to cut all non-ring-fenced budgets by 25 per cent but it’s worth remembering that Labour’s cuts wouldn’t have been much less savage. The Brown/Darling pledge to halve the deficit by 2014 would have seen cuts of 20 per cent to all non-protected departments.

So Ed Balls’s declaration that this promise was a mistake deserves to be taken seriously. It’s a more credible position than those campaigning against “Tory cuts” while refusing to accept that this means a slower pace of deficit reduction.

Balls told the BBC:

I always accepted collective responsibility but at the time, in 2009, I thought the pace of deficit reduction through spending cuts was not deliverable, I didn’t think it could have been done.

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This leaves open the possibility of a more even split between spending cuts and tax rises (George Osborne currently envisages a 77:23 ratio, Darling favoured 67:33). After all, during the last big fiscal tightening undertaken by a Conservative government, Ken Clarke split the pain 50:50 between tax rises and spending cuts. But Balls goes on to suggest that major cuts shouldn’t take place until the economy has recovered fully:

We’ll have to wait and see where we are once this huge risky experiment has been tried on our economy by the Conservatives and the Liberals. I can’t start pre-empting how things will be in a few years’ time but, you know, in my department I set out a third of a billion pounds of cuts, so obviously I’m not unafraid to make difficult decisions.

With confirmation today that growth in the first quarter of this year was just 0.3 per cent, the cautionary principle suggests that dramatic cuts should not take place until the economy is out of intensive care.

Balls, like some of his rivals for the Labour leadership, has belatedly adopted a clear line on the deficit. David Miliband has let it be known that he still supports the original pledge to halve the deifict by 2014, while Andy Burnham has come out against the coalition’s absurd pledge to ring-fence the £110bn NHS budget.

I’ve heard remarkably little from either Ed Miliband or Diane Abbott on the deficit, but perhaps Balls’s move will stir them into life.