In his column in this week’s magazine, Irwin Stelzer argues that Ed Balls is the only Labour leadership candidate with a solid grasp of economics. Balls will be hoping that his speech at Bloomberg HQ this morning (the setting for George Osborne’s attack on the “deficit deniers” last week) has proved as much.
All of the Labour leadership candidates have challenged the government’s decision to cut spending this year, but Balls’s speech is the most sustained and forensic attack on the coalition’s economic policy we’ve yet seen.
In a neat riposte to Osborne, he labelled the Chancellor a “growth denier”, who is ignoring warning signs of a double-dip recession. “What he is now doing is the equivalent of ripping out the foundations of the house just as the hurricane is about to hit,” he said.
With figures from both left and right now saying a double-dip recession is possible, Osborne can no longer credibly claim that such talk is “Labour scaremongering”. But will the “growth denier” label hurt him? That will likely depend on what the Q3 figures (due out on 26 October) look like.
For now, while polling suggests that voters are increasingly nervous of the coming cuts, most accept Osborne’s argument that the need to reduce the country’s £149bn deficit trumps everything else. Voters who are tightening their belt see no reason why the state should not do the same.
As for Balls, having correctly predicted that the coalition would raise VAT to 20 per cent, he will be hoping that his prescience has not deserted him on this occasion. If “the hurricane” that Balls warns of doesn’t materialise, his words will be dismissed as partisan hyperbole.
But the politics of this speech may turn out to be as significant as the economics. As the Spectator’s Peter Hoskin points out, the speech was a transparent pitch for the shadow chancellorship. But whether Balls turns out to be the shadow chancellor of the coalition’s dreams or nightmares may depend on what those Q3 figures look like.