Ed Balls has set out a multi-billion pound plan to bolster Britain’s stagnating economy, but insisted that Labour must also prove that it is capable of showing “fiscal responsibility in the national interest”.
The shadow chancellor told the Labour conference in Liverpool that the economy faced “the darkest, most dangerous times in my lifetime”, and repeated his call for George Osborne to adopt measures to bolster demand now.
But his familiar call for the coalition to adopt pro-growth policies was offset by a detailed apology for Labour’s mistakes in government and a promise to fight the next election on a platform of “iron discipline” on the public finances.
Mr Balls’s speech was a calibrated attempt to dispel suggestions – from the Conservatives and some in his own party – that he is “addicted to debt” and lacking any remorse about the last Labour government’s economic record.
The shadow chancellor even began by addressing suggestions that he harbours resentment over his unsuccessful leadership bid, describing Ed Miliband as “a friend” and someone who was “genuine, principled, honest and fair”.
Mr Balls’s remarks on fiscal discipline were welcomed by his critics, although one Labour MP said: “At least he is acknowledging that we have a problem but I wonder if it’s any more than just throat clearing.”
The scale of Mr Balls’s task in gaining the public’s trust is revealed in an Independent/ComRes poll today which shows only 27 per cent agreed that Mr Balls would make a better chancellor than George Osborne, while 43 per cent disagreed.
Mr Balls’s five-point growth plan included calls for a repeat of Labour’s bank bonus tax this year to fund £2bn of investment in affordable housing and job guarantees for 100,000 young people.
He also repeated his call for a temporary reversal of this January’s VAT rise to 20 per cent, which raises about £12bn a year. Meanwhile, he demanded an acceleration of infrastructure projects, an immediate cut in VAT to 5 per cent on home improvements and maintenance – a scheme which Mr Balls says would cost up to £500m.
A national insurance tax break would be introduced for small companies who take on extra workers, an extension of a government scheme which so far has had a very low take-up.
Tories claimed the plan would add £21bn to public borrowing but an aide to Mr Balls challenged the Conservatives’ calculations, which depend on an assumption that bringing forward capital spending would cost £8bn – the maximum possible from the departments Mr Balls mentioned.
Separately, Mr Balls said Labour would look at proposals for a National Investment Bank for small companies, tackling what he said were “market failures” in small business lending.
His comments echo the ideas of Adam Posen, a member of the Bank of England’s monetary policy committee, who has called on the government to create a public bank for lending to small business.
Mr Balls’s speech included an apology for a number of Labour errors in government – including failing properly to regulate the banks and getting value for money from all spending programmes.
But his core message was an attempt to reclaim the mantle of economic competence by promising “tough fiscal rules” at the next election to be validated and checked by the independent Office for Budget Responsibility, set up by the chancellor.
He said a Labour government would ensure that any windfall from the sale of the taxpayers’ stake in Royal Bank of Scotland and Lloyds Banking Group would be used to pay down the national debt.
John Cridland, CBI director-general, said: “Given that public spending cuts are vital to eradicating the deficit and protecting our triple A credit rating, it is right that Ed Balls commits to new fiscal rules. Labour has not got this right in the past.
“If affordable, some of Mr Balls’ proposals for stimulating growth are worth considering, but they must pass the affordability test. In my view, a VAT cut is not affordable.”