Ed Balls’ Sky News interview on Portugal and austerity

Sarah Hughes: So George Osborne there, saying that if Labour had won the election Britain would have ended up in the same position as Portugal. Is that right?

Ed Balls: I think this is a desperate piece of scaremongering from what is an increasingly desperate Chancellor who looks out of his depth. If anybody is playing Russian roulette with the British economy it is George Osborne taking a huge gamble now without any idea how it’s going to turn out. That may be good political lines but it is very bad economics. And it’s taking huge risks with jobs and businesses and family finances up and down the country. I think he has got this very, very badly wrong and he will rue this day with this blatant politicking.

SH: Are you a deficit denier playing Russian roulette with Britain’s national sovereignty?

EB: Absolutely not. There are many ways to explain why Britain and Portugal are so different. The fact that we had low national debt, that we had low interest rates, the fact that we are not a member of the single currency area unlike Portugal. But the biggest similarity is this: at the end of last year, who were economies which did not have growth in their economy? Ireland, Portugal, Greece and Britain. The fact is last year the Portuguese raised VAT twice. They put in place big spending cuts. They have a market crisis because their economy is not growing and in fact the analysts are saying in the financial markets, it’s not going to grow really very much this year, next year, the year after, the year after that. If you have not got growth, you can’t get your deficit down.

SH: Our deficit is bigger than Portugal’s, isn’t it? Our deficit is bigger than Portugal’s by almost three per cent. Doesn’t that mean that your argument that the cuts are going too far, too fast doesn’t stand up. We need to take action.

EB: No, and that is such a misconceived argument because America had a big deficit as well. America, like Britain, two countries hit by the global financial crisis, had big deficits. The Americans are the right comparison, by getting their deficit down in a steady way, unemployment is falling. In Britain, George Osborne has tried to go recklessly fast, this big gamble. And what’s happened? Unemployment is up. Growth has ground to a halt. The fact is we are not in the single currency like Portugal and that means they are locked into a very difficult place. It is a good thing that Labour did not take us into the single currency in 2003. But other than that, George Osborne, VAT up, big spending cuts. Look, it’s not working in Greece, it’s not working in Portugal, economies which didn’t grow last year. It’s not working in Britain either. He’s desperately trying to say to the British people, unless you have these big drastic spending cuts now, we’d have a crisis. But George Osborne, it’s his spending cuts which are causing growth to be down, unemployment to go up. To be honest, he is making that Portuguese mistake.

SH: But the markets seem to be reassured by the tough programme of cuts don’t they, what would you have done to reassure the markets and to reduce our deficit?

EB: But if you look at the market view of Portugal, what do they say; the reason why they are worried about Portugal is because of the prospect of subdued growth, fewer people in work, not paying taxes…

SH: And the Portuguese government couldn’t get the austerity measures through, would you have been able to get austerity measures through that would have prevented such a situation happening in Britain?

EB: Look the Portuguese government didn’t raise VAT once like Britain, they raised it twice last year. They’ve already had big spending cuts and they weren’t working. We had some tough decisions. Look there is no doubt we needed to get our deficit down, Labour said we’ll raise National Insurance, raise the top rate of tax, spending cuts for schools, for police, halve the deficit over a Parliament taking the approach the Americans are taking, a steady approach. George Osborne came in with the coalition, they made up this aberrant nonsense that Britain was like Greece back in June – one of those moments where Nick Clegg read out the line, however wrong and nonsensical it was. Since then what has happened? The economy has ground to a halt, unemployment has gone up, the financial markets I think are worried about where this is going round the world in countries taking this route. The fact is, look, there was a financial crisis, but Britain had low debt, lower unemployment and a Labour government taking difficult decisions but turning things round. George Osborne has played Russian Roulette with our economy. He is putting at risk jobs and business growth for families, he is desperately hoping it is going to work. He told us last autumn we were out of the danger zone and what has now happened the only economy to grow worse than Britain this quarter, Japan. And next quarter, other economies strengthening, Britain weakening. So, look, if you are going to be a Chancellor and you want to play politics with our economy and have easy lines fine, but the question is for George Osborne, it is hurting but is it working? And I think increasingly people are looking at him and saying to be honest, he is not just out of touch, when it comes to the economy he hasn’t got a clue.

SH: But would a Labour government, particularly under Ed Miliband, with union links been able to push through sufficient austerity measures to stabilise our economy?

EB: Yes. And we would have halved the deficit in 4 years. We had set out some difficult spending cuts, some difficult tax rises and what we weren’t doing was taking childcare support away from families who need it, we weren’t raising VAT. Most importantly, we weren’t trying to eliminate this whole deficit in just 4 years. That is too deep and too fast and in Greece, in Portugal, in Spain they have been told by the European Union, you’ve got to do it, but the problem is austerity isn’t working in those countries and increasingly austerity isn’t working in Britain. Thank goodness we are not a member of the Single Currency. But I go back to this point, at the end of last year, was America growing, was France growing, was Germany growing, did they all have big deficits? Why was it only Britain joining.. Greece, Ireland and Portugal, Denmark too, in actually having negative growth? Why has Britain joined the slow growth countries? What changed from the summer to the Autumn and now? What changed was George Osborne with reckless and deep spending cuts, which are crushing growth, pushing up unemployment and aren’t working and we’ve got to get to a rational debate about this for the future or else many, many young people, many families and many businesses will pay a very heavy price for George Osborne’s irresponsible politicking.

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Posted April 7th, 2011 by Ed's team

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