Why the Left should be celebrating Ed Balls’ Fabian speech on ‘fiscal discipline’
On hearing that Ed Balls was to use the Fabian conference to announce Labour’s commitment to a budget surplus, Hopi Sen tweets with mock insouciance
This is amusing, because his #intheblack labour side hasn’t won. It’s lost, and my side has won.
As George Eaton has pointed out*
While Osborne’s promise applies to total government spending, Balls’s only applies to current spending (day-to-day spending on public services, for instance teachers’ salaries and hospital drugs). This leaves open the option of Labour borrowing to fund additional capital spending (investment in assets such as housing and roads).
This is not something In the Black Labour ever conceived of in their original short paper.
Where George continues to get it wrong is his assumption that additional borrowing will go towards capital spending only. True, Balls focused on capital investment today, but the crucial (and largely ignored) Zero-based review makes it clear that there is an openness to non-capital social investment where additional funds are needed in the short terms to generate longer term savings to the public purse e.g. through investments in education and social justice-focused welfare provision.**
Ed Balls’ conversion (or re-conversion) to a reasonable sensible fiscal strategy in government should be a matter of celebration for the Left, much more than the politically attractive but much less meaningful 50% tax-rate (which should have been announced much later, giving top earners less time to shift there income around to avoid it). It comes about not least because of the pressure by sections of the Left on Labour to do something seriously pro-growth AND pro-social justice, and marks quite a big shift in our direction. If you look closely.***
* Fair play to George for finally waking up to this. It’s possible, though I’m sure he’d deny it, that he realised what was going on when I took him to task on his failure to keep up to date. His colleague Rafael Behr, whom I also found wanting, has conceded that I am right.
**This is easy enough to manage at a Treasury level – simply lower capital expenditure in Departmental budgets by shifting these costs into the new investment funds, thus allowing for increased investment-focused revenue in the Departmental budget.
*** To be fair to Hopi, he’s not alone. All the press comment I’ve seen other tha George’s has seen Balls’ speech as a simple move towards fiscal disipline, ignoring the bit about this only being on current spending, and the room that this leaves. This, for example, is quite wrong.