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28 September 2012

Balls tries to show that you can trust Labour with your money

The shadow chancellor's pledge to justify "every penny" makes political and economic sense.

By George Eaton

“Are you ready to trust Labour with your money again?”, asked Nick Clegg in his conference speech. The announcement by Ed Balls that Labour, if elected, would hold a “zero-based spending review” is an admission that he still needs to convince voters that they can answer “yes”. The record £159bn deficit may have been a consequence, rather than a cause, of the economic crisis but Balls rightly recognises that Labour didn’t always spend wisely in office.

A zero-based review (an idea proposed last December by In The Black Labour) differs from others in that it requires every item of spending to be approved, rather than merely changes to a pre-determined baseline. In other words, nothing is off the table. As Balls says in his interview with the Guardian:

The public want to know that we are going to be ruthless and disciplined in how we go about public spending. For a Labour government in 2015, it is quite right, and the public I think would expect this, to have a proper zero-based spending review where we say we have to justify every penny and make sure we are spending in the right way.

He goes on to add that the review will be subject to three qualifications. First, that Labour will commit to protecting spending in certain areas, such as international development and possibly health, based on its priorities of fairness and growth; second, that it will examine whether “cuts now would lead to higher costs in the future” (for instance, by cutting public health and other preventative budgets); and third, that Labour will seek to achieve a cross-party consensus before the election in specific areas, such as social care and children in care, which may then be excluded from the zero budgeting process. Elsewhere, in an interview with the Mirror, Balls states that Labour will use private firms to run public services if it believes they will offer the taxpayer better value for money. The New Labour mantra of “whatever works” lives on. And rightly so. There is no reasonable objection to any of the above.

But the interview is also notable for what Balls doesn’t say. With George Osborne due to announce spending plans for 2015-16 (the first post-election year) in next year’s Spending Review, recent speculation has suggested that Balls, in an echo of Labour’s 1997 strategy, could pledge to match them. In an interview with the Spectator, however, Harriet Harman poured cold water on this proposal, declaring that there was no chance of Labour “signing up to doing the very thing we think is hurting the economy”.

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Labour aides have since suggested that she was referring to this spending period, rather than the next one. But, offered the chance to settle the matter, Balls declined. And who can blame him? With Osborne’s growth and borrowing forecasts changing so rapidly (and not for the better), few can say what situation Labour would inherit. For now, the priority remains to push for an economic strategy that would, at least, limit the damage.

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