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.
Tags: Atul Hatwal, autumn statement, deficit, Ed Balls
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.
Paid for with what?
Look at each, tax cuts. Since when did tax cuts solve the problem? 50% tax rate is a tax increase and that solves the problem. You need to be consistent.
What about the 150 bn deficit?
What about all the unfunded liabilities hidden off the books? Same as Enron.
The latter is the major problem. When Debt to GDP is mentioned, its just for the bond market and PFI in the City. All they care about is will they get back the money they have lent. They are not concerned if other borrowings or debts are paid pack.
Those other debts are civil service pension (no funds), state pension (no funds) state second pension (no funds). People care if they get what they were promised for the billions they gave to the government (or were forced to give).
Civil servants are up in arms because there is a partial default going on.
State pension – CPI linkage – 15% off. 1 year increase in the retirement age, 5,000 lost, plus any extra contributions, plus lost interest.
If you work out what a median worker would have got if they had invested their NI in the “risky” FTSE, then they would have 21K a year, RPI linked, joint life. The government has taken over 75% of people’s pensions. 26K a year isn’t particularly wealthy, so taking 16K a year from their retirement is a massive amount.
There can be no numbers because, as Liam Byrne made clear after the last election ‘there is no money left.’
This is a terrible article that shows both a lack of basic economic knowledge but also political awareness.
The reality is this. Ed Balls was right. Is being proved right. And most importantly is giving us something positive to say about the deficit, where as we are now seeing, he is also right again.
The Tories are not going to abolish the deficit. Not a hope. This point is actually no longer up for debate. Osborne’s own independent body is going to say this. And it’s the most crucial part of next week. The Tories will have to go into the next election as failures. So we can forget all those arguments about how after the cuts we will be left opposing a popular tax cut. Cus there ain’t gonna be any tax cuts. There will still be no money left.
Revisiting the arguments during the leadership election. This shows just how far ahead of the curve Ed was.
http://labourlist.org/2010/08/the-growth-deniers-ed-balls-full-speech/
It’s important to remind ourselves that the deficit won’t be cut specifically because of the policies of this government. They cut domestic demand far too much. They pulled the chair out from under a weak economy. And even though their own independent body is saying that it isn’t working, they seem unable to change course. And that’s the point. The deficit problem is now being created by the coalition and not being fixed.
So having seen that the cut savagely to abolish the deficit strategy has failed let’s look at the political angle.
At the time of the leadership election, the counter argument to Balls in the party was along these lines. That we couldn’t win on the deficit that we should just shut up accept the cuts and try and move on. That was the only way we could stand a chance. In fact article after article from this site said that thing over and over again.
But if we had taken that route, the route you and others suggested. Osborne would just say you caused this (as you and others also wanted us to accept) and you agreed with what we tried to do. Therefore how can you blame us? In short we would have had nothing to say.
What’s worse, we would have had nothing to say and we would have been wrong.
Where we are now is at a crossroads of public opinion. The old certainty that we had to cut cut cut is being eroded. The promised hinterland is not transpiring. The economic vision that Osborne has vanished. The public is feeling the pain but isn’t seeing the economic improvement. And as their living standards are squeezed so their spending slows and the whole economy grinds to a stop. And of course, the deficit remains.
The Tories are into the next election as failures.
Good article, Unles we have a sensible plan that’s not just based on slowing things down, we’ will be not valid alterantive come the next election
Atul,
I believe i termed balls as the “Mad Hatter” (http://www.totalpolitics.com/articles/276962/ed-balls-interview.thtml), stuck in a time of his own making….wonder who the March hair is?
This is the issue to anybody with even the slightest imagination and a positive outlook who understands the desperate and urgent need (not sure the PLP can empathize or give a damn so they are unlikely to feel desperate or urgent about anything except their own dealings with the new expense system) to truly create the changes neither he nor Ed Milliband understand.
Milliband talks about transforming Capitalism and then about responsibility and everyone I know just falls over laughing. We are going back aren’t we to the old Purnellion ideas of consumers protesting against companies that don’t do things the way Labour wants them too to satisfy their own personal dodgy agendas or impractical moral dictates which once again highlight Labours utter lack of understanding of the private sector beyond daydreams, maladjusted tinkering and worse command from above unqualified nonsense one would normally expect a fifteen year old to dream up without the testing, training and development most grown ups have having worked for a living.
The good news is that the lack of credibility, even the way Balls presents himself as a merry clown locked in impractical economic minutiae that cannot be universally applied to different kinds of economies across the United Kingdom exposes him as a fool.
If I am looking to developing economies in the East of London or say the Suffolk countryside entirely different approached have to created and it has to come from working in partnership with those local areas to assess the economic and business needs.
In any case most of the points on the five point plan are negligible and change nothing to address the real issues as I can smell the fear of inflation underlying Balls cautious approach which will be to merely continue with the Tories spending commitments should there be a disaster and Ed Milliband or some other privileged and under-qualified shallow child like PLP unemployable loser become PM – God help us….
You have not defined yourselves, you have refused from start to finish to build trust with the electorate who will use you as a protest vote only in the narrowing range of areas where Labour exists and finally are no longer a movement as the coalition of movements that exists no longer identify with Labour.
Ed Milliband has emulated Brown by digging himself in deep, avoiding the public after embarrassing himself without even realizing it in any kind of authentic manner (how can you make someone with no depth, someone with gravitas and meaning?).
Balls is gibbering on the TV with an unqualified and disturbing bravado and confidence at a time when very sane people are very concerned about the situation we are in. Weird does not even cover it.
The saddest aspect to all of this mess for Labour is the nepotistic incestuous privileged awfulness of the Shadow Cabinet which is in composition more backwards and regressive than the nobility before the French Revolution.
The hypocrisy has gone beyond blatant and has entered a realm of incredulous blatant contempt for anyone outside it.
I genuinely apologies if this is not what you want to hear but it is sadly the truth.
I genuinly feel sorry for all of you and especially the activists who do believe in equality, fairness and a better economy that serves the people, but the platform presented to the public by Labour is the complete opposite and after the ID Card deception by Balls and Brown to even the members at Conference it is very clear that no words these people speak for even a moment can be trusted.
They neither practice the remotest progressive or positive politics and neither do they intend to deliver upon anything other than getting back into power and cashing in and feeling like celebrities surrounded by Sainsburys and their other real Friends.
The public and the members of the Party are merely an inconvenience that needs placating until the objective is met and the language will be progressive but no actions or compromises will be made at all in what the PLP do because they genuinely believe you all to be thick as you are not members of the Private Club and are not “elite” enough for them.
Ammended version:
Atul,
I believe I termed balls as the “Mad Hatter” (http://www.totalpolitics.com/articles/276962/ed-balls-interview.thtml), stuck in a time of his own making….wonder who the March Hare is?
This is the issue to anybody with even the slightest imagination and a positive outlook who understands the desperate and urgent need (not sure the PLP can empathize or give a damn so they are unlikely to feel desperate or urgent about anything except their own dealings with the new expense system) to truly create the changes neither he nor Ed Milliband understand.
Milliband talks about transforming Capitalism and then about responsibility and everyone I know just falls over laughing. We are going back aren’t we to the old Purnellion ideas of consumers protesting against companies that don’t do things the way Labour wants them too to satisfy their own personal dodgy agendas or impractical moral dictates which once again highlight Labours utter lack of understanding of the private sector beyond daydreams, maladjusted tinkering and worse command from above unqualified nonsense one would normally expect a fifteen year old to dream up without the testing, training and development most grown ups have having worked for a living.
The good news is that the lack of credibility, even the way Balls presents himself as a merry clown locked in impractical economic minutiae that cannot be universally applied to different kinds of economies across the United Kingdom exposes him as a fool.
If I am looking to developing economies in the East of London or say the Suffolk countryside entirely different approached have to create and it has to come from working in partnership with those local areas to assess the economic and business needs.
In any case most of the points on the five point plan are negligible and change nothing to address the real issues as I can smell the fear of inflation underlying Balls cautious approach which will be to merely continue with the Tories spending commitments should there be a disaster and Ed Milliband or some other privileged and under-qualified shallow child like PLP unemployable loser become PM – God help us….
You have not defined yourselves, you have refused from start to develop trust with the electorate who will use you as a protest vote only in the narrowing range of areas where Labour exists and finally are no longer a movement as the coalition of movements that exists no longer identify with Labour.
Balls is gibbering on the TV with an unqualified and disturbing bravado and confidence at a time when very sane people are very concerned about the situation we are in. Weird does not even cover it.
It’s very clear to any business, organization observing Labour that by the practices it employs it is not in any way committed towards Equal Opportunities or indeed fairness and that means by implication democracy and much needed competition in the private sector under Labour will always suffer as well as leaving many people without a voice or power to change things in their lives when they attempt to.
The public and the members of the Party are merely an inconvenience that needs placating until the objective is met and the language will be progressive but no actions or compromises will be made at all in what the PLP do because they genuinely believe you all to be thick as you are not members of the Private Club and are not “elite” enough for them.
An interesting artcile.
The real message is, perhaps?, that the Shadow Chancellor has so much baggage from his intimate experience of the Last Government’s disastrous economic policy, he personally cannot do a U turn.
Well he can , but then he would have to admit what everyone knows: he was wrong and Gordon Brown was a disaster .
And whilst Mr Balls is Shadow Chancellor, it’s just going to continue.. every time he speaks about economics, anyone with half a brain and a memory will recall that he was part author of the mess public finances are in.
As for “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.
I would just say.. Tax and Spend… the motto of every incompetent Labour Government… Guaranteed to lose the next 5 Elections.
If you bothered to do some basic sums, you would realises your proposals would – in the scheme of things – bring in diddly squat in revenues..
Anyone who reads any economic analysis realises economic growth for the next 10 years is going to be minimal. Not because of Government policy but because of Bank and public deleveraging..
So to promise or suggest a policy based on more tax and spend is as stupid as having Ed Balls as Shadow Chancellor. And as electorally rewarding.
Most people blame Labour, and they’re right because Labour blindly (and wilfully at the end) wasted vast amounts of public money. This is demonstrable, documented fact.
But the truth is that high-spending democracy really created this crisis. We’ve cursed ourselves with nothing but spend-happy career politicians, whose job as they see it is simply keep us happy/sedate and win elections with populist policies regardless of consequences. Before the crash Conservatives and Labour spent years in public bidding war to promise the highest spending.
That’s why Ed Balls can’t give honest answers and an workable (harsh, painful) plan. Because he is focussed on public perception & election, not the national interest. He simply doesn’t know how to do anything else. In all of Westminster we’ve got politicians when we need leaders. That is why even now there are still expensive and wasteful policies being implemented by the coalition (green taxes for example).
In the present situation all the government can do is try to keep our economy from going under, and hope to weather the oncoming storm. Things are going to get nasty in Europe and we’re in very bad economic shape. All we can do is pray that the markets keep focus on the EuroZone and ignoring our obviously serious problems. The current government has no certain plans for growth, but no one has any idea how we’re going to get growth in this total clusterf**k of a situation.
Ed balls the Mad hatter who murdered money and has nothing left to offer….