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Coffee House

Analysis: Ed Balls is right on HS2, wrong on almost everything else

23 September 2013

2:01 PM

23 September 2013

2:01 PM

I will admit to a grudging admiration for Ed Balls. He’s wrong about most things, dangerously so. But his speeches are always well-considered, full of substance and usually part of a strategy that he keeps up for months if not years. For that reason, his speeches are always worth reading. This was a good speech, full of substance and forceful expositions of classic leftist errors. Aside from his bizarre towel joke, here’s what jumped out at me from his speech here at the Labour conference in Brighton:-

1. Back to the 1970s! Balls pledges to reverse reform and return to the pre-Blair Labour. Ed Balls was always against the Blair-era reforms of health and education, and now describes them as Tory ideas which he would abolish. He talks about an ominous free school policy: that Labour would deny parents choice, by banning new schools if there are places to fill in bad ones.

“And conference, we will repeal the damaging and costly Tory privatisation of the NHS. And we will ask: does it really make sense to have separate costly management and bureaucracy for so many separate government departments, agencies, fire services and police forces? And Conference, we won’t pay for new free schools in areas where there are excess school places, while parents in other areas are struggling to get their children into a local school.”

This amounts to a pledge to destroy not just what the coalition have done for public services, but what the Blair government did too.

2. HS2: it’s about Cameron’s ‘vanity’. HS2 is running out of supporterPhase Two Route Of The Proposed HS2 Rail Link Announceds every week: the CBI, the IoD, Vince Cable – Ed Balls, ever the strategist, will see that HS2’s collapse is inevitable. So he’ll want to call for it now. This will dismay its chief advocate, Andrew Adonis, who is running a growth review for Ed Miliband.

“Under this government the High Speed 2 project has been totally mismanaged and the costs have shot up to £50 billion.  David Cameron and George Osborne have made clear they will go full steam ahead with this project – no matter how much the costs spiral up and up. They seem willing to put their own pride and vanity above best value for money for the taxpayer. Labour will not take this irresponsible approach. So let me be clear, in tough times – when there is less money around and a big deficit to get down – there will be no blank cheque from me as a Labour Chancellor for this project or for any project. Because the question is – not just whether a new High Speed line is a good idea or a bad idea, but whether it is the best way to spend £50 billion for the future of our country.”

3. The ‘harsh, deep cuts’ canard. Both Ed Balls and George Osborne pretended that the cuts were radical and deep; neither would quantify them because neither wanted to admit that they totalled less than 1 per cent a year. Ed Miliband has discouraged this rather mendacious critique, but Balls is out to claim vindication:-

“They claimed in 2010 that faster tax rises and deeper spending cuts would secure the economic recovery and make it stronger…They didn’t secure the recovery, they choked it off – as we warned – and flatlined our economy for three wasted and damaging years.”

Screen Shot 2013-09-23 at 12.18.19

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4.     “Something which would not have happened without Labour votes in Parliament, the progressive triumph of gay marriage” Odd that Balls feels the need to claim joint ownership of Cameron’s gay marriage bill when I’d argue that the real landmark was New Labours’ Civil Partnerships Act. Cameron just reworded this. He re-enacted a battle that Tony Blair fought, with minimum of upset, ten years ago. But of course, that victory was under Blair, so I suppose Balls would rather pretend that didn’t happen and credit the Tories instead.

5.    But much of his attack is solid. The facts do support the following accusations, and it’s no good conservatives dismissing the message because they loathe the messenger. Osborne’s record is wider, and hopefully there’ll be something to boast about by 2015. But it does, alas, contain the defects that Balls mentions below:-

“Let us remind [the Tories] : prices rising faster than wages for 38 out of the 39 months since David Cameron entered Downing Street. Three years of flatlining..  The slowest recovery for over a hundred years A million young people out of work

Welfare spending soaring. More borrowing to pay for their economic failure. That is their economic record. And we will not let them forget it.

The below graph shows what he means: real salaries are low, and getting lower. Not much good talking about a GDP recovery while this is going on.Real earnings CPI deflated £

7. Wrong about welfare

Building on the success of Labour’s Future Jobs Fund – so short-sightedly scrapped by this government – we will introduce a Compulsory Jobs Guarantee for young people and the long-term unemployed. We will fund this by a repeat of the tax on bank bonuses and by restricting pension tax relief for the very highest earners to the same rate as the average taxpayer. And we will work with employers to make sure there will be a paid job for all young people out of work for more than 12 months and adults out of work for two years or more, which people will have to take up or lose benefits. That is welfare reform that works. When people get into work they should always be better off – it should always pay more to be in work than on benefits. So we must do more to make work pay. The national minimum wage is one of Labour’s proudest achievements.

Another jobs guarantee? Labour would propose these kinds of ‘guarantees’ in government and they didn’t work. Balls is right to say that work should always pay – but constantly mucking about with benefits and schemes creates a complex web which ensnares the poor. Only Iain Duncan Smith’s Universal Credit  would repair this – an ambitious product, certainly, but a much-needed one. Higher minimum wage is a bad tool that doesn’t work: it risks pricing the low-skilled out of jobs, tax claims back what employers are forced to fork out and you can still be better-off on welfare. In reaching for these old, broken levers Balls shows he is unserious about tackling poverty.

7. The trickle-down myth

 “We cannot succeed as a country with this ‘race to the bottom’, deregulation, laissez-faire and old-style ‘trickle-down economics’. It’s a narrow and defeatist vision. Doomed to fail. And we have seen it fail before.”

Actually, he hasn’t seen trickle-down economics before. No one has, as it does not exist. Not a single professional economist has ever said they believe in it. It’s a bogey man, concocted by the likes of Balls. The left love attacking this non-existent theory, yet the point about capitalism is that wealth trickles up. The guy who sets up a company is usually the last to benefit: after customers, staff hired, customers served etc are always the first. But this is all part of Balls’ peculiar 1970s economics, which he threatens to bring back.

I know that CoffeeHousers dislike Ed Balls rather intensely. The fact that his analysis of living standards is correct is even greater cause for alarm: this time, he’s not making it up. His towel joke (that I blogged about earlier) may detract attention the more sinister implications of his speech. It was a powerful reminder that the stakes at the next election are very high indeed.

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