Ed Balls gave a politically fine-tuned performance today. He re-committed Labour to independent monitoring of its fiscal rules. There were lots of ‘tough choices’. He chose not to restate his decision to limit public sector pay explicitly but on spending, pay, and pensions he warned there would be tough decisions ahead. In fairness, he must feel that he has taken enough flak already on the limits to pay increases ; this wasn’t backsliding.
Balls’ plea that you can’t set out spending plans now over two years ahead of an election in an uncertain environment is a fair one. A ‘zero-based’ spending review after the election is, well, a spending review. He made clear that Labour’s new fiscal rules – more credible than Osborne’s rolling five year targets – will set debt on a downward trajectory. That will require the speedy elimination of the structural current deficit and a tight set of spending limits across the board in reality. The politics of this will be fraught.
If there is an area where he could say more it’s about the process by which Labour makes its broad commitments at the next election. Personally, it seems to make sense to outline the fiscal rules, set the broad parameters of a budget and then ask an outside agency or body such as the IFS to assess the credibility of the plans. That means some of the spending review will need to happen before rather than after the election. The fear has to be that any doubt here will play into fears of Labour’s determination to reset the Budget on a sustainable footing. There is time for all this and I suspect that Balls knows that he will have to do more. Until the next Coalition spending review that is difficult to do.
The best part of the speech was the latter third where he set out a vision of a new political consensus around social protection and infrastructure investment. Basically, new protections such as in social care are going to be difficult to achieve other than through consensus and in the short-term. It is also crazy that we seem incapable of prioritising growth-enhancing investment matched with long-term finance. This should be the real purpose of a new national bank – on the model of the European Investment Bank. Small business finance needs something more sectoral, local, and flexible – new mutuals, funds and specialist institutions.
Overall, this speech was politically astute, serious and plausible. This shadow Chancellorship is a work in progress but progress is definitely evident. Osborne and Cameron may be Butch Cameron and the flatlining kid. This speech was more towards the good and there was no bad and ugly. There is no longer a fistful of dollars. Labour still remains The Unforgiven. But this movie is far from over yet. In fact, it’s just getting going.