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Ed Balls: Labour's cutting remarks Ed Balls: Labour's cutting remarks
(4 months later)
If the last five years have taught us one thing, it is that the public accounts and the national accounts are not separate – a government's own finances are bound up with the economy it runs, and can only be managed as such. While Barack Obama's half-throttled reflation has secured half a recovery for America, Europe's tack of fixing debt first and the economy only second has produced a double dip. George Osborne's expansionary fiscal contraction thesis lies in tatters, and Ed Balls used much of his big speech on Monday to say "I told you so". After that, however, he gave us a novel taste of Labour-flavoured retrenchment.If the last five years have taught us one thing, it is that the public accounts and the national accounts are not separate – a government's own finances are bound up with the economy it runs, and can only be managed as such. While Barack Obama's half-throttled reflation has secured half a recovery for America, Europe's tack of fixing debt first and the economy only second has produced a double dip. George Osborne's expansionary fiscal contraction thesis lies in tatters, and Ed Balls used much of his big speech on Monday to say "I told you so". After that, however, he gave us a novel taste of Labour-flavoured retrenchment.
Mr Balls has understandably long resisted little lists of cuts. Snatched-back fuel payments, cancelled free schools and fewer naval officers: these things will not tap new and sustainable sources of growth, while arguably reinforcing the coalition's cuts-first discourse. But with Mr Balls still failing to convert his analytical argument into stronger economic trust in the polls, the party has to get specific. Besides, voters are not wrong to believe that there will be dreadful choices to make whoever is in power; barring the seismic and unrepeatable spending of the second world war, expansionary economics has never succeeded to the point of transcending tricky trade-offs. Nor are voters wrong to want particular fiscal reassurance from parties of the left, given the base of state staff and clients.Mr Balls has understandably long resisted little lists of cuts. Snatched-back fuel payments, cancelled free schools and fewer naval officers: these things will not tap new and sustainable sources of growth, while arguably reinforcing the coalition's cuts-first discourse. But with Mr Balls still failing to convert his analytical argument into stronger economic trust in the polls, the party has to get specific. Besides, voters are not wrong to believe that there will be dreadful choices to make whoever is in power; barring the seismic and unrepeatable spending of the second world war, expansionary economics has never succeeded to the point of transcending tricky trade-offs. Nor are voters wrong to want particular fiscal reassurance from parties of the left, given the base of state staff and clients.
While sticking to his stern general brief, Mr Balls found room for a few progressive gestures. Moving away from the VAT cut he has championed since the crisis and towards infrastructure investment is welcome. Lower VAT puts money in pockets fast in an emergency, but an opposition planning for power should have time to devise a more imaginative stimulus than a shopping spree. Scrapping the inhumane Titan prison would be a rare case of retrenchment for the good. The immediate £100m saved by withdrawing winter payments to well-heeled pensioners is small beans; its significance is what it potentially says about the wider balance of the consolidation. Some £111bn out of £202bn in this year's social security budget, 55% of the total, goes to the over-60s. With baby boomers starting to retire, pensioners are also the big prospective pressure.While sticking to his stern general brief, Mr Balls found room for a few progressive gestures. Moving away from the VAT cut he has championed since the crisis and towards infrastructure investment is welcome. Lower VAT puts money in pockets fast in an emergency, but an opposition planning for power should have time to devise a more imaginative stimulus than a shopping spree. Scrapping the inhumane Titan prison would be a rare case of retrenchment for the good. The immediate £100m saved by withdrawing winter payments to well-heeled pensioners is small beans; its significance is what it potentially says about the wider balance of the consolidation. Some £111bn out of £202bn in this year's social security budget, 55% of the total, goes to the over-60s. With baby boomers starting to retire, pensioners are also the big prospective pressure.
But the tough-talking coalition has run a mile – arbitrarily exempting senior citizens from its myriad welfare cutbacks, and indexing state pensions more generously at the very same time as all other benefits are held below inflation. Decent pensions are a marker of civilisation; but the wholesale exemption of the bulk of the welfare budget from discussion has left younger families being thrown increasingly to the dogs. The last thing Mr Balls wants is this kind of discussion – he chose his words with great caution on Monday. But then so did David Cameron in 2010, when he said he would save a couple of hundred million on tax credits paid to families on £50,000-plus. On coming to power, he immediately cut credits for anyone on £30,000, and has since cut them for everybody – including the poorest of all.But the tough-talking coalition has run a mile – arbitrarily exempting senior citizens from its myriad welfare cutbacks, and indexing state pensions more generously at the very same time as all other benefits are held below inflation. Decent pensions are a marker of civilisation; but the wholesale exemption of the bulk of the welfare budget from discussion has left younger families being thrown increasingly to the dogs. The last thing Mr Balls wants is this kind of discussion – he chose his words with great caution on Monday. But then so did David Cameron in 2010, when he said he would save a couple of hundred million on tax credits paid to families on £50,000-plus. On coming to power, he immediately cut credits for anyone on £30,000, and has since cut them for everybody – including the poorest of all.
After Monday, Labour sounds less likely to cut in the same lopsided manner as the coalition, and it deserves credit for that. But the necessity and extent of further social security cuts remains subject to a debate which has not yet taken place. Reports that Ed Miliband will soon follow up on Monday's speech by backing a total cap on welfare spending are thus troubling. George Osborne is planning to make the Lib Dems squirm by announcing the same in his spending review this month. A crude cap would lead to arbitrarily harsh decisions, and weaken the "automatic stabiliser" of rising social spending during a slump, something all the parties have previously agreed has helped contain the depression. If Labour wants to claim that its cap is something less crude, then it had better do it very well.After Monday, Labour sounds less likely to cut in the same lopsided manner as the coalition, and it deserves credit for that. But the necessity and extent of further social security cuts remains subject to a debate which has not yet taken place. Reports that Ed Miliband will soon follow up on Monday's speech by backing a total cap on welfare spending are thus troubling. George Osborne is planning to make the Lib Dems squirm by announcing the same in his spending review this month. A crude cap would lead to arbitrarily harsh decisions, and weaken the "automatic stabiliser" of rising social spending during a slump, something all the parties have previously agreed has helped contain the depression. If Labour wants to claim that its cap is something less crude, then it had better do it very well.
That, however, is a matter for later in the week. On Monday, Mr Balls faced the tough task of flashing a little cold steel, without amputating any progressive principles, and he more or less pulled that off.That, however, is a matter for later in the week. On Monday, Mr Balls faced the tough task of flashing a little cold steel, without amputating any progressive principles, and he more or less pulled that off.
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