The Guardian view on Ed Balls’s cuts proposals

http://www.theguardian.com/commentisfree/2014/sep/22/guardian-view-on-ed-balls-cuts-proposals

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On almost any measure, George Osborne’s plan A did not come off. The two years of lost growth he inherited became six, wages remain stuck on the floor, and one parliamentary term of austerity has slowly turned into two. Somehow, however – and despite Ed Balls’s spirited speech on Monday – there is a sense in which the chancellor has got his Labour shadow just where he wants him in the run-up to the election. For where Mr Balls likes talking about investment and growth, themes his party is always keen to hear about too, on Monday he was explaining how he would retrench.

Even in the best of times, Labour expectations need careful management where public spending is concerned. Irrespective of who may be to blame for the continuing fragility of the public finances, the next few years will involve painful decisions. So it is not hard to see why Mr Balls gave the speech he did. But, as he and the chancellor are well aware, the polling shows that Labour is never going to win an argument about who can take the toughest choices. Through the dog days of 2011 and 2012, Mr Balls specialised in a sharp criticism of the coalition’s attempts to cut its way out of stagnation. By always thinking about the deficit first and the economy second, he argued, the government neglected its own role in keeping the economy moving, as well as the effect of growth on the books.

But the Keynesian case for doing something different was only ever going to last for as long as the downturn persisted, which was never going to be forever. In its place, it might have been good to hear some development of Ed Miliband’s “predatory versus productive capitalism” theme, ideas about reforming the banks, for example, or even some comment about the latest corporate shenanigans at Tesco. Instead, the shadow chancellor simply lapsed into the coalition’s own dubious analogy between family and government budgets: “Working people have had to balance their own books. And they are clear that the government needs to balance its books too.”

The specific savings that Mr Balls identified – lower ministerial pay, an affluence test on pensioners’ fuel payments and one extra year of capped child benefit – will make no discernible dent in the deficit. They are important only for what they say about where the serious axe-wielding would be targeted after the election. By swallowing a pay cut for themselves, as well as by floating various taxes on banks, mansions and top pay, Labour’s top brass signal determination to push more austerity on to the well-heeled. By withdrawing winter fuel help from the wealthiest 5% of pensioners, Mr Balls prefigures a wider discussion about the imbalance of benefit cuts affecting the old and the young. More significant still, by vowing to “do what it takes” to save the NHS, he signals readiness to put up taxes, drawing a line under the coalition’s grotesquely lopsided fiscal tightening, which involves chopping around £9 off public services and benefits for every £1 in extra revenues.

All of these signals, however coded, underline that Britain faces an important choice next year. Resolution Foundation analysis reiterates this, revealing how similar-sounding government and opposition fiscal commitments have very different implications. Because Labour’s target allows borrowing for capital spending and more wriggle room over the timing, the total additional cuts in departmental spending beyond those both sides have already agreed might be kept to 1% after 2016. That compares to 9% under an Osborne plan to cut the debt faster, which also includes £12bn of fresh and unspecified benefit cuts. For a party that could be just a few months away from taking power, the mood in the conference hall is remarkably downbeat. A few well-judged lines from the shadow chancellor – on raising the minimum wage and axing the bedroom tax – went some way to lift spirits. If the battle for credibility over cuts to come has forced Mr Balls to dance to Mr Osborne’s tune on the economy, Mr Balls has the top tax-cutting chancellor on the run on the question of who could manage the continuing squeeze more fairly.