by Atul Hatwal
Ed Balls is walking into a trap. Unfortunately, it’s one he has set himself.
Next week George Osborne will deliver an autumn financial statement swathed in uncertainty and gloom for the government. So far, the questions from the media have focused on the chancellor’s forecasts and whether he will hit his deficit target, but at some point someone will ask Ed Balls those same questions about Labour’s plans.
Specifically, George Osborne, in the chamber, on Tuesday.
Ed Balls hasn’t mentioned the Darling plan in months, but based on what Labour’s frontbench have been saying and the party’s policy platform, we have a fair view of what Balls will set out.
Labour’s five point plan for growth defines our alternative approach. Out of five pledges, three are straight tax cuts – reversing January’s 2.5% rise in VAT, cutting VAT on home improvements and repairs to 5% and a one year national insurance tax break for small firms hiring new employees.
Given this, at the despatch box, Ed Balls will be promising growth from the tax cuts that will make-up the immediate revenue shortfall and increase economic activity so that unemployment falls, tax receipts go up and the deficit falls.
Quite a complex case with lots of links in the argument, but no numbers on either deficit totals or timelines.
Osborne will come back at him with a single figure, the increase in the deficit from unfunded tax cuts – £87bn. He’ll then follow up by saying Labour has abandoned the Darling plan and any schedule for deficit reduction.
A hard number with a simple argument, the trap will be sprung.
What does Balls say to rebut that number? And what does he say about the Darling plan?
To many on the left, these questions miss the point. The public will see through Osborne’s attack. The government has failed on growth and people will see the need for action.
But if any are in doubt about the difficulty Balls will be in on Tuesday, then consider the problems the right are having with their arguments on removing the 50p tax rate.
It’s almost a mirror image of the political problem Balls will face against Osborne.
Whatever the right wing think tanks, commentators or Tory MPs say about generating future growth by abolishing the 50p band, it’s all jam tomorrow based on unproven assumptions.
The Telegraph has been leading the pack, earlier this week trumpeting a cost of over £1bn to the economy from having the 50p rate.
But it’s a losing game. To anyone looking at this pragmatically, the idea of cutting tax for the richest is ridiculous because it pitches a certain loss in revenue today – an average of over £2bn each year – against a hopeful gain at some unspecified point in the future
When the right say “trust us, our unfunded 50p rate tax cut will drive growth”, the only people who believe them are their true believers.
Any guesses what the result will be for Labour?
The news coverage of the financial statement will carry footage of Balls assailing Osborne for lost growth, missed targets and youth unemployment, while Osborne hammers Balls for advocating policies that will make the deficit worse by almost £100bn.
To the viewing public, the missing element from Labour’s case will be any rebuttal of the £87bn deficit charge, beyond, “trust us our tax cuts will make things better – though we’re not going to tell you how much better”.
Tuesday night’s news will confirm for wavering voters that although the Tories don’t have a clue about growth, debt would be higher under Labour.
In a political environment where voters consistently blame the current problems on debts from the last Labour government, it will pour yet more poison on the party’s tattered reputation for economic competence.
The tragedy is that this is all completely unnecessary. There’s no need for questions about whether Labour is still sticking to the Darling plan. Few would disagree that the economy needs stimulus, but what does the shadow chancellor have against raising revenue or at least finding some savings to pay for it?
Increase the bank bonus tax, bring in a mansion tax, levy a utilities windfall tax, charge a bank profits windfall tax, cut Trident, cut free schools do something, do anything, just find some money before spending it.
The travesty is that Labour is running on a platform that the lunatic fringe of the Republican party in America would endorse. Multi-billion pound tax cuts, zero revenue raising measures and zero cuts to the right’s sacred cows like nuclear weapons.
It’s a Labour tea party complete with mad hatter politics and looking glass economics. Based on the logic of Labour’s five point plan, we should actually be backing plans to scrap the 50p rate as well. After all, if unfunded tax cuts pay for themselves, then the more the merrier.
Curiouser and curiouser.
Atul Hatwal is associate editor of Labour Uncut.