Ed’s interview on Sky News’ Murnaghan programme

DERMOT MURNAGHAN:

Let me first of all though ask you about the terrible situation in Japan, we’ve all watched open mouthed as they’ve emerged over the last three or four days. They’ve had the earthquake, the tsunami and now the threat of some kind of nuclear problem, what kind of aid should we in the UK be offering them and are we doing the right thing?

ED BALLS:

Well I’m sure that William Hague, the Foreign Secretary, will be offering everything he possibly can. Britain needs to stand by the Japanese people and the reality is, as you said, that what starts off as just pictures of devastation will now become thousands of human stories of great tragedy and I’m afraid these events in the world seem to be happening more frequently and however prepared you are – and the Japanese people have clearly been very prepared for these kind of events – it is no preparation in the end when the scale of a natural disaster is as big as this and I think as a country we should do everything we can to give support to the Japanese.

DERMOT MURNAGHAN:

Okay, and we’ll be getting more on that later in the programme but to return to the domestic scene, you for some time have been warning about the threat to the economy of a second, a double-dip recession, because of the government policies, in particular VAT at the moment and the effect it has on fuel. What should the Chancellor be doing in ten days time in his budget to address those problems?

ED BALLS:

Well I think there are two things aren’t there, living standards and then the bigger question about growth and jobs in the economy, they are very related. On the first point I think the VAT rise in January was very badly timed, it has pushed inflation up, it’s made it harder for the Bank of England but of course it has contributed to what was already a big rise in world oil prices, it’s an own goal from the Chancellor really to push up petrol prices even more. It’s not sensible for us to blame the Chancellor for high world prices but he can act now. In the budget he has a choice to make about fuel duty, when we were in government we often didn’t go ahead with fuel rises if the world oil price was high but I think he should act immediately on VAT. This was an own goal, he didn’t have to do it. In parliament on Wednesday we’ll be urging Conservative and Liberal Democrat MPs to join with us in voting in parliament to urge the Chancellor, cut VAT on fuel now and give immediate relief to hauliers and motorists across the country.

DERMOT MURNAGHAN:

So have you done your sums there? How much more would you borrow to cover that?

ED BALLS:

Well the cost of bringing VAT down [on road fuel], back to where it was before, is £800 million according to the House of Commons Library. George Osborne announced a few weeks ago he was going to increase the annual bank levy he is going to charge to the banks into the future, that would get £800 million, so actually if he used the bank levy from the banks every year to pay for that fuel cut that would cancel each other out, so there is no need for more borrowing for that, that pays for itself.

DERMOT MURNAGHAN:

So just to get it straight then, you are only talking about VAT on fuel, so keep the increase, Labour is fine with the increase to 20% on everything else?

ED BALLS:

Well look, as you know there is a wider question about the Chancellor’s strategy for growth, jobs and living standards. We have said of course the deficit must come down, there are going to have to be some hard decisions. We took some on national insurance, on police budgets, on schools budgets but George Osborne is going too fast and too deep with these spending cuts. I think the VAT rise was deeply unfair, the wrong tax and too early. The cuts in child benefit will be very painful for families on £42, 43,000 and I don’t think that’s fair. Generally if he tries to crush the economy on spending in this way the danger is, as we are now seeing in the economy, unemployment is no longer falling, it’s rising, the economy ground to a halt at the end of last year. The second thing I think he can do immediately in the budget – I don’t think he is going to listen to me and slow down the pace of deficit reduction, he seems to be so dug in to this very extreme and reckless strategy but what he could do though is repeat for a second year the Bank Bonus Tax which raised £3.5 billion last year, use a more cautious number than £3.5 billion this year in order to do immediate action on youth jobs, because youth unemployment is near a million, and also on construction because we have seen 27,000 jobs go in construction in the last year, the construction industry is warning this year of big job losses and stagnation. George Osborne can act now and get the economy moving again, that’s the best way to get the deficit down.

DERMOT MURNAGHAN:

Okay, I know George Osborne, I interviewed him last week, has a lot of plans and he will tell us more about it in the budget on that but I just want to be crystal clear then about what you are saying about VAT. You have called it now, you called it before the wrong tax at the wrong time yet barring fuel you would keep it at 20%?

ED BALLS:

Look, as the Shadow Chancellor I have to look ahead to the next election and I’ll say very clearly to you, I can’t now come along and make commitments on every tax rate and every benefit rate for the future, it is just not a responsible thing to do. In two areas I am saying there is action which can be taken now to cut VAT on fuel and to use the Bank Bonus Tax to boost jobs and construction and Ed Miliband and I will set out the details tomorrow, on Monday, in Westminster. More widely than that I think the VAT rise is really unfair and very damaging, I wish George Osborne would reverse it now. What I can’t do is make a commitment about what we would do in four years time, we’ll have to see where we are. But look, I will say very loud and clear he is cutting too deep and too fast.

DERMOT MURNAGHAN:

Well that’s fine, you’re calling on George Osborne to reverse it so I come straight back to you and say where do you find the £13 billion it gains for the Exchequer?

ED BALLS:

Well because there are three ways to get the deficit down – tax rises, tough decisions on spending and growth and jobs in the economy. If you have fewer people in work paying tax that makes the deficit higher, it makes it harder to get the economy moving. A year ago when Labour was being more cautious about deficit reduction, it was coming down in a steadier way. As Alistair Darling explained to you on your programme last week, unemployment was falling. George Osborne has now got the most extreme deficit reduction of any country other than I think Greece and Ireland, the result is he is going too fast, he is putting people out of work, he is cancelling construction contracts and not surprisingly there are fewer people paying tax. It is a crazy economic strategy.

So what would it be prudent to borrow this year? The projection, probably an under shoot but the projection from the OBR is about £148 billion. What would we have seen under Labour, £160, 170, 200 billion? What would still be prudent to borrow?

Well actually as you saw again in that interview last week, Alistair Darling saying with his plans a year ago borrowing actually came in £20 billion lower because we had more people in work and the good news on borrowing for the last few weeks is a result of actually those decisions a year ago to get the economy growing and to get unemployment down. What we are now seeing is a complete change of strategy from George Osborne, we see unemployment going up, that’s going to make it harder. I think George Osborne will be very careful in his own terms to use this as some kind of good news because he knows the underlying economy is now going in quite the wrong direction and what he ought to do is listen to wise advice saying to him you’re going too deep and too fast and you should change your strategy.

DERMOT MURNAGHAN:

Mr Balls, you would agree with him though in the aspiration to see the private sector growing as fast as it possibly can and we know from straws in the wind, from hints they’ve made, that they are going to look at the issue of red tape and restrictions and bureaucracy particularly on smaller businesses and it has been said today they are looking at the issue of maternity leave and paternity leave for instance for those with fewer than ten employers. Do you think that’s a good idea?

ED BALLS:

Well I think it’s right to support the private sector to grow, we need a growth strategy although the most important thing to do is to boost the economy as we’ll set out tomorrow. There are things that you can do, I think to support research and development as well as small business jobs in construction would be very wise but we are reading on the front of the Sunday Telegraph that actually George Osborne thinks his growth strategy is to take away the rights of mums and dads to balance work and family life. You can’t blame working parents for the lack of growth in this economy, the idea that you would think that getting rid of those regulations will boost growth and jobs, actually the danger is if he sets it as firms below ten employees, small businesses will have an incentive to reduce their employment to benefit from those kind of short term breaks. The fact is, there is a balance to be struck in an economy between being fair to parents and getting the economy moving but deregulation of maternity and paternity rights is not a growth strategy and if George Osborne puts that at the centre of his plans, if he uses the need for growth in order to be a smoke screen for an assault on the rights of mums and dads, any unnecessary badly designed legislation should be got rid of but mums and dads need to balance work and family life and parents should not pay for George Osborne’s failure on growth and jobs. I fear that’s what he’s planning but it is not too late for him to think again, ten days from the budget this is the weekend to get things right. Spending cuts ideologically crushing the economy, taking away mums and dads rights and calling that a growth strategy, this is just absurd. It is not going to help our economy, it’s not going to help families, I hope he thinks again.

DERMOT MURNAGHAN:

A lot of people like you are very angry with the government’s strategy particularly over the issue of cuts and particularly in the public sector and threatening a wave of strikes coming up but you have said in other quarters that you feel that that may be falling into the government’s trap. Why would people be wrong to go on strike, to express their feelings and concerns?

ED BALLS:

Look, it’s a right of working people in our country to go on strike if they have a grievance or to demonstrate and I would never say people shouldn’t do that in certain circumstances but what I do think is that David Cameron as Prime Minister and George Osborne are almost urging a return to that confrontation. He’s calling the council in Liverpool, the Labour council, politically motivated by making these cuts which given the scale of the savings they have to find, the difficult the decisions that they’ve made, seems pretty offensive to me but I don’t think the British people want to go back to the confrontation, the police stuck in the middle, the huge days lost in strikes of the 1980s. We need to make sure that we don’t make those mistakes again and therefore I think the unions, the trade unions and the Labour movement need to be the responsible people in the face of provocation from David Cameron and George Osborne. Nobody wants strikes, we want the government to think again, to do things in a fair way which supports jobs and I hope that that’s what they’ll do.

DERMOT MURNAGHAN:

Mr Balls, thank you very much for your time. Ed Balls, Shadow Chancellor, live there from Morley.

ED BALLS:

Thank you Dermot.

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Posted March 13th, 2011 by Ed's team

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