Murnaghan 4.03.12 Interview with Ed Balls, Shadow Chancellor

ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well the American economy is seeing a bit of increased growth, the eurozone turmoil seems to have steadied for now and in the UK, manufacturing, retailing and housing are all showing one or two glimmers of hope, so how should the Chancellor interpret the data as he prepares to deliver the Budget later this month? Is this evidence of Plan A beginning to work or should he still alter course as Labour argue? Well in a moment I’ll be speaking to Labour’s Shadow Chancellor, Ed Balls, but just to let you know also watching the discussion are our Twitter commentators, they are David Wooding, associate political editor at the Sun, Andrew Woodcock, political editor at the Press Association and Jane Merrick, political editor at the Independent on Sunday. They provide their reactions via Twitter and you can read those on the side panels as we go along and you can also follow on our website, that’s skynews.com/politics and you can join in as well if you use the hashtag #murnaghan. Well let’s say a very good morning to Shadow Chancellor, Ed Balls. With that scenario I painted there, one or two glimmers of hope, do you still think that the Chancellor should inject real stimulus into the economy in the form particularly of the tax cuts that you’re recommending?

ED BALLS: I do and I think the cautious thing to do is hope for the best and the careful and prudent thing to do is to get this economy moving. The fact is, the American economy, as you said, is now growing, unemployment is falling, because they have taken a more balanced approach to the deficit. Here in Britain George Osborne said that going faster than other countries would lead to a private sector led recovery, get unemployment down. Our economy has been as flat as a pancake, unemployment rising and I’m afraid even the good news suggests it continues being very painful and very difficult on the deficit, unemployment and growth this year.

DERMOT MURNAGHAN: But you have to be careful, as you admit, with the deficit with those signs, whether you call them green shoots but manufacturing, the order books beginning to look better, retailing saying they had a pretty good January, the housing market holding up, wouldn’t it be irresponsible to risk the credit rating with some tax cuts and increased borrowing?

ED BALLS: I think the irresponsible thing to do is to plough on regardless when your policy is not working and George Osborne in November had to say he is going to be borrowing £158 billion more than he planned, the austerity now going into the next parliament, unemployment still rising and if unemployment is rising then you don’t get your deficit down because you are paying more on benefits and fewer people are paying tax. So I don't think the responsible thing to do is yes, have a tough deficit reduction plan over the coming years but do it in a balanced way and his belief – there was this phrase George Osborne said ‘Expansion re fiscal contraction’ – incomprehensible but also economically nonsensical. The fact is, trying to contract too fast has actually been worse for the deficit in jobs so the responsible thing for him to do is to change course and take a more balanced approach, learn from America and don’t try and …

DERMOT MURNAGHAN: But inevitably Mr Balls, a question I have put to you many times, but that is then if you do what you are doing in particular, cut VAT which is an instant hit to the Treasury of around about £12 billion, how do you replace that as you wait for the growth to result? That will lag a bit, after you have primed the pump the water doesn’t come out for a while, do you risk the market’s wrath with that £12 billion hole in the Exchequer finances?

ED BALLS: But the last time you put that very point to me, you said won’t not acting lead to more borrowing and then a few weeks later George Osborne had to announce that not doing that had led to billions of pounds more in borrowing because it goes to this fundamental truth which he can’t accept – unless the economy is growing, unless you have got some dynamism in the economy, then unemployment gets worse and the borrowing doesn’t come down. Even the credit rating agencies who I’ve never thought you should follow in terms of the lead on policy, they have said that austerity on its own becomes self-defeating. That is George Osborne’s problem, he knows that economics isn’t working, he thinks that politically he should just plough on because he can’t afford to change course but I’m afraid his way is not working.

DERMOT MURNAGHAN: But to be fair on the credit rating agencies, they also said that borrowing any more would not be the way forward.

ED BALLS: Yes, and the credit rating agencies said that Lehman Brothers was a sound investment in 2007, they said last summer that America was downgraded and then what happened? America started growing, their unemployment came down and their interest rates didn’t rise so as I said, George Osborne’s big mistake, he said a recovery, lower borrowing, lower unemployment, the credit rating agencies, lower interest rates – what’s happened? The economy’s flatlined, borrowing’s up, unemployment is rising, even the credit rating agencies are saying where’s the growth, interest rates going up too, what’s he got left? None of it has worked.

DERMOT MURNAGHAN: Well there is one issue that straws in the wind about in the Budget that presumably you would agree with in terms of tax cuts, this moving faster on the Liberal Democrat aspiration to take people who earn less than £10,000 out of the tax net altogether, that’s something presumably you would applaud?

ED BALLS: I think there are two tests to the Budget: test one, is there a jobs and growth plan? George Osborne and Nick Clegg don’t want to talk about that and then …

DERMOT MURNAGHAN: Just on that specific issue, I mean this is injecting money into the economy, this is putting money into people’s pockets.

ED BALLS: And then the second test is can you make things fairer for the future than is happening at the moment? I said I think the VAT cut is the best but I think a personal allowance rise, a cut in fuel duty, those things would make sense. George Osborne and Nick Clegg seem to be saying, they are telling the newspapers that if they can find a way to make the mansion tax work, and in the past I’ve supported that, if George Osborne can make a mansion tax work on multi million pound properties, fine but Nick Clegg now seems to be saying that the first priority for using the mansion tax would be to cut the top rate of tax for people on £150,000 – where’s the fairness in that?

DERMOT MURNAGHAN: Well he hasn’t actually said that …

ED BALLS: Well he told the Times newspaper …

DERMOT MURNAGHAN: … and let me ask you about that 50p rate because we heard from George Osborne that we’re going to get the HMRC view on it or some of the data on it that is coming through when he announces the budget. I suppose it is this issue of fairness versus growth, isn’t it? Of course the higher paid should pay more and those with the broadest shoulders etc but if it’s proven that this element of fairness is costing growth in terms of making entrepreneurs and others leave the country or perhaps set up their tax affairs so they don’t have to pay as much, wouldn’t it be worth letting that element of fairness go and cutting the top rate a bit?

ED BALLS: You are right to say those with the broadest shoulders should bear the burden and it is also right to say that no tax rate should be set in stone and if in the coming years we can move on that as a country then fine but do we really think that families on £150,000 plus are the first priority? I am saying to George Osborne, and we have got a vote in the House of Commons tomorrow on two things, first of all he is planning to cut £3000 in tax credits from families on £17,000 where you have got two people in the household, one is not working, the other is. If they can’t do 24 hours then they lose £3000 – where’s the fairness in that? We are actually going to show today that for those families that change will mean they will be worse off in work, that’s what Parliament is being told. He is also saying he is going to take on Child Benefit and he is going to take Child Benefit away from families on £42,000, already struggling with higher fuel bills. If you are a two-earner family on £84,000 you keep it but if you a one-earner family with three kids on £42,000 you lose £2500 – where is the fairness in that? Do you really think we should say lose your tax credits on £17,000 in work, lose your child benefit on £42,000 but for growth and fairness we should move on people above £150,000?

DERMOT MURNAGHAN: A lot of people are going to agree with you listening to that but putting those points forward, you then have to answer the charge what would a Balls budget look like? Just sitting here, we can’t tot up the totals here but we’ve heard you support the VAT tax cut, that’s your recommendation, saying you are quite interested in the personal allowance, cut the excise duty on fuel – I mean there is an awful lot of spending commitment, oppose these changes in benefits, so many, many spending commitments, where is the money coming from to cover those holes?

ED BALLS: The tax credit change that we are proposing in parliament tomorrow should be paid for by the hundreds of millions of pounds that is being avoided in tax on Stamp Duty. On Child Benefit, George Osborne should announce a review now, stop it immediately and make changes before January to make it fairer. Our five point plan for jobs and growth and the VAT cut is essential to get the economy moving, unemployment down and to actually get the deficit down.

DERMOT MURNAGHAN: What about fuel duty?

ED BALLS: Well on fuel duty George Osborne has made lots of promises in the past, I’m not sure what’s happened, it is really painful for families with fuel at the moment. Past Labour governments didn’t go ahead with duty rises in these circumstances. We’ll see on budget day but our immediate VAT cut would help motorists in their pockets straight away.

DERMOT MURNAGHAN: So that would be the cut, not a cut beyond that?

ED BALLS: Well we could definitely do that but the problem is, the reason why it is so difficult for George Osborne, he thought by this point he’d be delivering the growth and the tax cuts but it’s all gone so badly wrong and therefore he is now faced with a situation where he has to say austerity is going to carry on for even longer than I expected but it’s his fault.

DERMOT MURNAGHAN: But you’ve accepted that, you’ve accepted the austerity, this is part of the mea culpa over the previous Labour administration is it not, that you accept that austerity has to go on longer because you overspent in government?

ED BALLS: No, I don’t accept that at all. We went into this downturn and financial crisis with a lower debt than other countries and at the general election, of course the financial regulation was not strong enough on the banks but because of the action taken, unemployment was falling and growth was accelerating and that’s gone into reverse so the question you’re asking me is …

DERMOT MURNAGHAN: So you’re proud of that spending record in power, every penny spent was well spent and needed to be spent?

ED BALLS: I am not going to say to you every penny was well spent, of course that’s not the case and no government does that but am I proud of more police officers, not police officers cut, am I proud of more doctors and nurses and waiting lists going down and not going up, am I proud of more teaching assistants in the classroom backing teachers? Absolutely. All of those things are going into reverse. David Cameron and George Osborne said the public cuts would lead to private sector jobs, where are they? The challenge for me which is going to be really hard is that we at Labour are going to have to clear up George Osborne’s economic mess, the lack of growth, the higher unemployment and I’ve said look, we’ll have to make tough decisions, I’m afraid – and this is hard – I want it done in a fair way but public pay restraint will have to continue next year and the year after because George Osborne has got things wrong but he can act now on Child Benefit and tax credits to do things in a fairer way but there is no sign he is.

DERMOT MURNAGHAN: That strategy puts you a bit between a rock and a hard place doesn’t it because you get the likes of Len McClusky who you’ll be aware of saying that is an extraordinary mistake, that is madness, accepting that element of the austerity problem and then your own policy guru from the past, Lord Glassman, saying the problem is that Labour will not admit – and I am just quoting directly from him – that it spent too much while in government and didn’t admit that now when it says we will cut less far and last fast, doesn’t tell us how.

ED BALLS: Well I don't think Maurice Glassman has ever claimed to be a policy guru of mine and may I politely say vice-versa. The fact is, we invested properly in public services, we didn’t get bank regulation right, of course we didn’t spend every penny right but £3 billion wasted on NHS reorganisation, that is a colossal mistake from David Cameron as well. They are going too far and too fast, it’s not working, we need long term reforms in our economy for jobs and growth but we some need basic action on fairness now and George Osborne and David Cameron said we’re all in this together, so why are they hitting families on low and middle incomes harder than those at the top? Why is it that child benefit for a family on £42,000, £43,000 which is going? David Cameron was telling his aides this weekend, like some sort of medieval …

DERMOT MURNAGHAN: What do you think can be done on that? Should it just stay universal, just leave it alone altogether or that there could be another way of perhaps moving it up or mitigating the effects on that particular band of people you are talking about?

ED BALLS: Well in my view the right system was universal child benefit for all because I think it’s important that everybody is supported with children but then using tax credits to make work pay for those on lower and middle incomes. What David Cameron and George Osborne said is to get rid of universal child benefit and take it away for top rate tax payers but this is the point, they are going to have to explain to their supporters and Conservative MPs why a one earner family where a partner stays at home, loses it on £43,000. Think of it, £2500 for a family on £43,000, how do they afford that? But they keep it if you have got two earners just below the threshold on £84,000. Why doesn’t George Osborne sort that out, he rushed into this, he hadn’t thought about it.

DERMOT MURNAGHAN: Can I just ask you, Mr Balls, just to end, that comment that you made about Lord Glassman, he was obviously advisor to the leader Ed Miliband, do you think then it was a mistake to listen to him?

ED BALLS: Look, I’m not sure what Ed Miliband has listened to Lord Glassman about. He made some important points about improving vocational training and I think he is right about that, he said some things about marriage which I don’t fully agree with and on this point about …

DERMOT MURNAGHAN: But it is this issue of your leader being badly advised and perhaps not finding a voice and a connection with the electorate.

ED BALLS: I don't think Maurice Glassman is a close advisor to Ed Miliband but he is in the House of Lords, he makes a contribution, he’s in the debate, he either is or isn’t writing a column for the Sun, I’m not quite sure.

DERMOT MURNAGHAN: But on the leader, on Mr Miliband, you think he is finding his feet now, getting into his stride?

ED BALLS: I think on the NHS he has set the terms of the debate in the last few weeks brilliantly and David Cameron is digging a deep hole for himself and can’t get out of it. These NHS reforms are reckless and I’m afraid on phone hacking, Ed Miliband spoke the truth last summer and he was right about that and on the economy, short and long term, he is saying, we are saying, jobs and growth plan but also fairness in tough times and long term reforms, that is the right agenda. Many people, including Maurice Glassman, support aspects of that agenda but you know, it’s not always the case that your gurus deliver on every issue.

DERMOT MURNAGHAN: Okay Mr Balls, thank you very much indeed, Ed Balls there and we heard that, digging a hole, so we’ll see more of that signal coming up in the House of Commons we will? We’ve done the flatlining so now we’ve got the digging a hole.

ED BALLS: Digging a hole. Look, I hope David Cameron stops digging, I really hope so.

DERMOT MURNAGHAN: Okay, Mr Balls, thank you very much indeed, Ed Balls there, the Shadow Chancellor.