It’s only ten days or so since Ed Balls was last quizzed by Andrew
Neil, but there he was rehashing many of the same lines on the Sunday Politics today. Among the things that stood out was this: the shadow
chancellor’s argument on the public finances is ever more cleaving into two halves. First, he accuses George Osborne of borrowing £150 billion more over this Parliament than originally
planned. (Although there’s a detail that often, conveniently, gets obscured: namely, that borrowing is still
going down year-on-year under Osborne’s plan). Second, that Balls’s plan would decrease borrowing in the medium-term even though it would increase spending and reduce tax revenues in the
short-term. His thinking is that a stimulus now would mean growth sooner, and that would improve the fiscal situation more rapidly than the coalition envisions.
Even if you have more faith in Balls’s economics than I do, it’s still a tricky argument for him to make. Rightly or wrongly, ‘We have to increase borrowing in order to decrease
borrowing,’ has a similar ring to that infamous line about Ben Tre. And then there’s the fact that Balls is expecting us to take so
much of this on trust. Today he admitted that he has ‘not costed the whole programme’ — but he seems to have costed its imaginary benefits, all right. To many viewers that will
seem evasive, bordering on the fantastic.
Besides, there is one organisation that has run (what we know of) Labour’s fiscal plan through their calculators, and that is the Institute for Fiscal Studies. As I’ve blogged before, they reckon that if a Labour government hadn’t announced ‘additional fiscal
tightening’ after the March 2010 Budget, in the face of the continuing economic storm, then they would be borrowing considerably more in every year of this Parliament than the coalition
currently is. In their own words:
‘All things considered, it seems likely that, in the absence of the additional fiscal tightening announced since the general election, borrowing would have been on course to be closer
to £76 billion in 2016–17 than to the £26 billion that was forecast in the March 2010 Budget.’
Of course, Balls would dispute this, saying that his stimulus would create more growth than the IFS accounts for. In which case, it’s worth remembering another passage from their
‘Of course, there are uncertainties around any estimates of the impact of policy changes on overall borrowing and it is possible that some of the weaker outlook for the economy has
actually been caused by a detrimental impact of the additional fiscal consolidation announced by the coalition government that is not captured in the official estimates of the measures’
impact on revenues and spending. However, the error in estimating the size of the policy impact would have to be implausibly large to lead one to conclude that borrowing would actually have been
lower in the absence of the additional tax rises and spending cuts that have been announced since May 2010.’
Which, like I say, just leaves Balls, versus the IFS, asking you to take him on trust. Your call, CoffeeHousers.
Give something clever this Christmas – a year’s subscription to The Spectator for just £75. And we’ll give you a free bottle of champagne. Click here.