Balls attacks ‘gamble’ on economy

All Information For You

Labour leader Ed Miliband appointed Ed Balls as shadow chancellor following the surprise resignation of Alan Johnson. Photograph: Oli Scarff/Getty Images

Ed Balls, the new shadow chancellor, claimed on Saturday that the government’s “reckless gamble” of massive spending cuts was already harming the economy as the country headed for high unemployment, lower mortgage lending and slower growth.

Balls, who was promoted last week after the surprise resignation of Alan Johnson, showed signs of a newly combative approach as he claimed that the coalition had turned a promising economic outlook into a gloomy one by pushing through “the fastest, deepest deficit reduction in Britain’s peacetime history”.

Labour MPs had become frustrated during the first months of Ed Miliband’s leadership at how the coalition managed to pin all blame for the deficit on Labour. They were also dismayed at how Tories and Lib Dems had convinced large sections of the public that there was no alternative to their strategy of savage fiscal retrenchment.

Balls, who was denied the shadow chancellor post by Miliband last autumn, after the leadership contest, is determined to stamp his mark on the job by showing there is a clear alternative. This will be to reduce the deficit through slower, targeted spending cuts and more active policies to encourage job creation and growth.

Writing on his blog, Balls described 2011 as “a critical year” for Britain’s economy and public services, which would show the effects of David Cameron and George Osborne’s approach.

While stopping short of predicting a “double-dip” recession, he said there were already signs that the government had made the wrong choice – an approach that could backfire if the economy turns round later this parliament.

“The Tory-led government has deliberately and needlessly taken Britain down a different path with cuts that go too far and too fast, and tax rises which directly hit family budgets,” he says.

“They have cut jobs programmes, withdrawn government investment from the economy, raised VAT and cut government support to millions of families. And in the autumn – before the impact of these measures had even begun – George Osborne and David Cameron boasted that their gamble had already succeeded and that strong growth was secure.

“Instead, we are now starting to see the real consequences of their decisions: unemployment rising, economic growth forecast to slow, mortgage lending at a 20-year low, and tax revenues falling.”

The economic outlook could worsen further in months to come. “Over the coming months, as the impact of the VAT rise, deep spending cuts and rising inflation starts to hit home, we will be able to gauge the true impact of the Tory economic plan, and see whether their gamble has worked. If they are proved wrong and growth is slow this year, it is millions of ordinary workers, families and homeowners who will pay the price.” MPs on all sides of the Commons now predict more fiery exchanges between Labour and the coalition over the economy. The Tories accuse Balls of being a “deficit denier” and refusing to admit the errors of the Gordon Brown years. Last week they said it “beggared belief” that Miliband had appointed him after his record at the Treasury.

But in private, Conservatives admit Balls will be a more formidable performer in the economic brief than Johnson.

Balls said that Labour’s alternative would put “jobs and growth first”. “Instead of doing backroom deals with the banks on the disclosure of their pay, we would apply the bank bonus tax again. It brought in £3.5bn last year, which could be used this year to help create the jobs and growth we need.”

On Friday, the day after his appointment, Balls – who had opposed Labour’s policy of halving the deficit over four years, believing that level of cuts was too rapid – said he could now back the policy because borrowing had been less than expected, and growth higher, thanks to the effect of Labour’s action in government.

Balls added: “It is not too late to change course. It is not too late for an alternative. And if they do not provide it to the British people, Ed Miliband and I will. Of course we do not oppose every cut, but the Tory-led government is cutting too far, too fast. And over the coming weeks and months, we will hold them to account for the reckless gamble they have taken, and the historic mistake they have made.”

The Guardian World News

---