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Balls’ bloodlust gets the better of him

16 June 2011

6:09 PM

16 June 2011

6:09 PM

Ed Balls’ problem is his killer instinct. If he were a Twilight vampire,
he’d be a Tracker: someone whose uncontrollable bloodlust takes him to places he should avoid. His position on the
deficit is so extreme — more debt, more spending — that he’s pretty much isolated now. People are mocking him. John Lipsky, the acting IMF chief came two weeks ago and rubbished
Balls’ alternative (as Tony Blair did) — so Balls, ever the fighter, has today given a long speech where he sinks his fangs into Lipsky and says (in effect) "I’ll take on the
lot of you!"

But Balls is brilliant. Often George Osborne seems not to bother arguing, and instead seeking approval from an alphabet soup of external agencies ("I must be right, the ABCD says so!")
Balls is in the old-fashioned business of making arguments. Good for him. But he can’t resist stretching the truth, sometimes until the elastic snaps. So a lot of what he says is
intentionally misleading. We had a lot of it in a speech today. It was so long that you almost lose the will to
live by the end of it. But we at Coffee House do love a bit of Balls — whether he’s telling outright lies, stretching the truth or just being outrageous. Say what you like about him
(and we do), he often sets the terms of debate. That’s why his claims are worth examining.
i) The fake "fork in the road". Balls, like Brown, specialises in drawing dividing lines. He claims there is a fundamental difference between Labour’s plans, and
the course Osborne has adopted. As he says: "There was a choice. On the one hand, to continue with Labour’s economic plan: maintain the emphasis on jobs and growth, while continuing
a steady and balanced approach to halve the deficit in four years. On the other, a political decision to eliminate the structural deficit in a Parliament — a fiscal tightening of such scale
and severity that it would have to begin immediately."

Demonstrable junk. Osborne has simply adopted the Brown/Darling deficit reduction plan (slow cuts spread over four years), and yanked it up a notch. In total, he’s cutting less than 1 per
cent a year more than Brown/Darling’s published plans. But Balls makes this sound far more dramatic saying Labour would have "halved the deficit" over the parliament and Osborne
would have "eliminated the structural deficit". This makes it sound as if Osborne is going twice as fast. In fact, the "deficit" and the "structural deficit" are two
different things. This is the "false comparator" device beloved of the Brown era. The "deficit" is straightforward: the difference between spending and taxes. The
"structural deficit" is an estimate of what the deficit would be if the economy had recovered. The first is fact, the second is opinion. But the OBR has published its estimate of the
structural deficit. Seeing as Darling published his five-year plan, we can compare it with what Osborne proposes:

So, the honest comparison? Labour’s economic plan was to cut the deficit by 61 per cent over five years, and Osborne now proposes to cut it by 74 per cent. Or Labour would have cut the
structural deficit by 66 per cent against Osborne’s 87 per cent. This is the only honest way of quantifying the difference between the two. Balls intends to mislead — hoping no one will
make the above calculation. He later tries this fake comparison again: nice and simple, so broadcasters can understand it. “George Osborne is trying to eliminate the deficit rather than halve
it”. It’s rubbish. There was no fork in the road. Osborne is heading only slightly faster in the same direction.
ii) The "frontloading" myth. “George Osborne’s plan was primarily about electoral politics — rapid tax rises and spending cuts chiefly designed to
fit a political timetable that gets the pain over early."
This is the myth of the front-loaded cuts. Balls laughably claims that "George Osborne did not hesitate in making a rash
and headlong lunge down the path of rapid deficit reduction."
Luckily, state spending figures are released every month — so let’s see how rash and headlong Osborne has been in
his cuts.

Contrary to the Ed Balls fantasy, Osborne has so far succeeded in outspending Labour by an average 5.1 per cent. He does intend to get a little bit more ambitious — but the
"sharpest" cuts are happening in year three. But there’s not that much difference: like Darling’s plan, it is pretty evenly spread.

For Balls to continue this fake line of attack, he needs to pretend that Tory cuts are urgent and fast — as opposed to what he later calls his "fair, gradual spending cuts". Osborne
is cutting state spending by a total (yes, a total) of 3.7 per cent over four years. If that’s not gradual, then I don’t know what is. Osborne should be getting the pain over early. But
he isn’t
iii) Balls horror at long-term welfare dependency. He says the 1980s recession was a time when, if “adults and young people out of work for months, which turned into
years, and left a permanent scarring effect on their skills, their health, and their ability and willingness to ever work again. How many people in this room would feel confident about their job
prospects if you’d been out of work for over a year and had to compete against other candidates with an unbroken employment record?”
Indeed so. If Balls is angry about this now, he
must have been apoplectic during the 13 years his boss Gordon Brown was in Downing St. Here is the number of people who had been on out-of-work benefits under Labour, by duration:

At least Thatcher had an excuse: a recession, an industrial realignment. To the shame of Labour economic policymakers (e.g. E. Balls) they kept millions on benefits during a boom.
iv) Balls claims he ran Britain. It’s worth nothing the way that Balls now portrays himself as a puppet master, lumbered with a big Scottish puppet. Slowly, he is taking
personal credit for the handful of things Gordon Brown did which don’t look like an utter disaster. This passage is worth noting: “Setting out tough fiscal rules just before the
1997 election and sticking to Tory spending plans for the first two years; delivering Bank of England independence; ensuring that in 1999 all the proceeds from the 3G mobile license sale were used
to repay the national debt; and resisting UK membership of the Euro … they all show that I’m not someone who shirks tough decisions.”
Consider the vanity required for a
special adviser to make such claims, and that he expects to be thanked now. Here we were thinking it was Blair and Brown running Britain when, in fact, it was the great Balls all along! All hail!

v) Balls appears to disown Brown legacy. “So when I am asked in interviews, what would I be doing differently to cut the deficit, the first thing I say is that — in
the words of the old farmer being asked for directions by a passing driver — I wouldn’t be starting from here.”
Really? We can only assume that the deficit would be even
bigger if he’d has his way. And remember, he was all set to replace Darling in 2009 —  and was only stopped when it became clear Cabinet members would resign in protest.

vi) Balls’ incurable statism. “With the £2 billion that could be raised this year from repeating the bank bonus tax, we believe the Government should provide
£1.2 billion to fund the construction of more than 25,000 homes across the country. This would generate more than 20,000 jobs and several times more in the supply chain, and as many as 1,500
construction apprenticeships”
Even if the maths work out (which they don’t), witness how Balls thinks the only way you can grow an economy is by taxing people, and using the
confiscated money to hire other people. The idea that a government should cut taxes, and then let job creation happen — as it always does — seems alien to him. Balls was born too late,
and in the wrong country. He’d soar in 1970s Moscow.

vii) Balls is right to suggest tax cuts. Balls is right to focus on the unnecessary and ill-timed VAT hike, and right to say “the fiscal hit to demand
and growth in Britain this year is unprecedented
”. He wants a temporary cut (I’d call for a permanent one) which he says “would be a boost for consumers who are feeling
the squeeze from rising prices and rising taxes.”
Only here does he make a modicum of sense. If Balls had stuck to this line of attack — focusing on cost of living, and denouncing
the VAT line for compounding the pain — he’d have more plausibility.

But unlike Balls, I’d fund the VAT cut by finding more savings in state spending. If that’s not an option, an emergency income tax cut for the low-paid would be a more effective stimulus. As Sweden
showed, this can be self-financing by luring
people off benefits. It’s the obvious next step — but Balls’ own ideology forbids him from such conclusions. For him, the sole source of employment growth is state spending.

viii) Balls has the audacity to complain about the debt burden passed to the next generation. He talks about “those who have worked all their lives but
for whom flat wages, the fear of unemployment, higher fuel and food prices and growing debt means they’re seriously worrying about their futures — and those of their children —
for the first time. As Ed Miliband has said, this is a threat to the Promise of Britain — the promise that the next generation will be better off than the last.”
Words fail.
Balls’ entire logic — cuts are bad, borrow now — means knowingly saddling the next generation with billions upon billions in debt. He talks about Labour’s stewardship of the
financial crisis without ever mentioning the price: trebling Britain’s national debt. The below graph shows the debt burden in 2007 — and the projection for 2020 made after
Brown’s post-crash debt binge. Balls was by Brown’s side for those 13 years. The below is their one and only legacy:

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