Transcript of Ed Balls’ interview with Sky News’ Murnaghan programme

DERMOT MURNAGHAN:

Now the front page of the Observer newspaper will make unhappy reading for the Chancellor today, George Osborne, this morning as leading economists warn that his plans for economic recovery are not working. Two former members of the Bank of England’s Monetary Policy Committee have also come out against the government just days before the decision on whether or not to raise interest rates. Well in a moment I’ll be asking the Shadow Chancellor, Ed Balls, about his plans to encourage growth and his response to that article in the Observer. Also watching the discussion will be our Twitter experts. They are Vincent Moss, the political editor of the Sunday Mirror, we’ve got Alistair Heath, the editor of City AM and Rowenna Davis, columnist for the Guardian, they provide their reactions via Twitter, you can read that on the side panels if you’re watching in HD, you can also follow on our website, skynews.com and please do feel free to join in, all contributions welcome. Well let’s engage now with the Shadow Chancellor, Ed Balls, a very good morning to you, Mr Balls. This article, this letter in the Observer, it’s all grist to the mill is it not, to your argument that we need a Plan B, that we need to borrow more to stimulate growth.

ED BALLS:

Well we were told in the autumn by the Chancellor and by David Cameron that it would work, that we were out of the danger zone, that by cutting this fast – the fastest deficit reduction of any major economy in the world, that would mean the private sector would be spending and investing more, confidence would rise, the economy would do well and I’m afraid that the opposite is happening. Confidence is down and we’re now seeing week by week more evidence that the economy is stalling and that’s what we’re seeing today on the front of the Observer.

DERMOT MURNAGHAN:

Just talk us through the strategy then. You’ve got to prime the pump, so you have to either borrow more or tax more, how much more do you think would be prudent to stimulate this growth that you think will then pay back in the future?

ED BALLS:

Well let’s be clear, the deficit has got to come down, there’s no argument about that, there’s no argument that there has to be tax rises and some spending cuts, there’s no argument about that. The question is the pace at which you go. If you go in a balanced and steady way, the economy recovers, more people are working and paying taxes, that helps to get the deficit down but if you go too far and too fast, as I’ve been saying for some months, the danger is it makes it harder and what George Osborne has had to admit already is the economy is going to be weaker this year and as a result of that unemployment over the next few years will be 200,000 higher and as a result of that borrowing will be £46 billion more. So it’s not a case of borrowing more, it’s actually borrowing more because the strategy isn’t working, that’s George Osborne’s problem.

DERMOT MURNAGHAN:

We understand that argument and those economists understand that argument but there is that short term then boost in borrowing. You have to borrow, you have to as I say prime the pump, the employment growth will not come through instantly if you do stimulate in the fashion and we discussed the role of the state but we are looking at 122 billion isn’t it, the forecast for 2011/12? I mean how much more would that be under Labour or would taxes rise? What would it be?

ED BALLS:

Well look, boosting borrowing is not really quite right. Everybody agrees that borrowing has to come down. It went up because of the global financial recession, it wasn’t a recession made in Britain …

DERMOT MURNAGHAN:

Yes, but you say that the government is going too fast and they want to borrow 122 billion, is their forecast for 2012/13, you would borrow more, you would do it less fast, you would do it more slowly.

ED BALLS:

They want to get rid of the whole deficit in just four years. We say that’s too fast. Of course it’s got to come down but if you come down really fast … Look, George Osborne’s been saying that by going faster I’ll make the economy stronger. What we’re now seeing in all the evidence and on the front of the Observer, is by trying to go that fast he is not making the economy stronger, he’s making it weaker and the result is that it’s harder to get the deficit down.

DERMOT MURNAGHAN:

I understand the argument but only time will tell. Under your analysis, yes, that increased borrowing will eventually come through in higher growth and therefore for lower borrowing but it is just this medium term and short term spike in borrowing that must come under your plans. How much more would it be?

ED BALLS:

Spike is not right, is it, because it’s coming down. We say it should come down, George Osborne says it should come down, the issue is how fast you come down. Now it is true that we think we should be reducing it at a more balanced and steady pace, the result of that would be the economy would be growing. A year ago when we had a plan to halve the deficit in four years we had a growing economy, unemployment falling, confidence rising – that’s all gone into reverse. That’s what’s happened. Look this is a hard argument but it is a very important argument – if you try and go too far and too fast you get into a vicious circle which ends up with fewer people working, slower growth and therefore more borrowing, not less.

DERMOT MURNAGHAN:

But it is a simple question, Mr Balls. There is a 122 billion forecast for this fiscal year, 101 billion I think forecast for 2012/13, it would be more then under your Chancellorship, you would be reducing the borrowing but this year 122 billion, what would it be? 20 billion or what?

ED BALLS:

Look, what I can’t do now I am no longer in the Treasury, I’m in Opposition, half way through the year without seeing all the detailed tax numbers from HMRC, is to tell you exactly where we would be now. What I can do is say to you a year ago when we were in government, borrowing came in £20 billion lower than we expected because the economy was growing and unemployment was falling. George Osborne is now having to say growth is going to be lower, unemployment higher and borrowing higher. Now I can’t say to you in detail what the figure would be, what I can do is say to you is that he is trying to cut £40 billion more this year and next and it’s self-defeating, it’s a vicious circle.

DERMOT MURNAGHAN:

But it’s just that we are all keen to get some idea of the shape of Labour policy.

ED BALLS:

I’ll tell you, and this is very, very important, that the economic impact of our plans would be better for the economy because we would be reducing borrowing but at a steadier pace. He’s going too fast and it’s not working and the truth is that he said it would and it’s not been working.

DERMOT MURNAGHAN:

If you can’t be specific about numbers just tell me about the philosophy here. I listened to a speech by Ed Miliband last week or the week before, talking about asking less of the state. That’s a philosophical kind of definition of Labour’s policies yet what you’re talking about with this money is of course more state intervention to stimulate growth.

ED BALLS:

Why do we have a crisis? Because we didn’t regulate the banks in a tough enough way, I agree and I was part of getting that wrong. George Osborne said I was too tough but he wasn’t right, neither was I. We need tougher regulation of the banks, that means the state needs to be doing more to get the banks under control. It’s why I am also saying today that we should use the Bank Bonus Tax for a second year to help young people get back to work, to stop that 1980s scar of youth unemployment being so high. You need government to work with the private sector to get young people back into work. That doesn’t mean that the state can run everything or employ everybody, of course it doesn’t.

DERMOT MURNAGHAN:

Or pick winners.

ED BALLS:

Or pick winners, definitely not, and sometimes often the state needs to get out of the way, in my view tough competition policy to help small businesses set up is really important. You need a tough competition authority but you don’t want government to step in to say I’m going to back that firm rather than that firm. Sometimes you need to have less government, of course, but the idea that as a matter of ideology … What George Osborne said last autumn is if I cut public spending faster, the private sector will be more confident and create more jobs, what we have seen is we’ve seen the economy grinding to a halt, we’ve now got economists saying have a Plan B and if I can just say one thing, the lesson I learned from all that time in the Treasury and the lesson, to be honest, I think history teaches us is it sounds good for a Chancellor to say I’m going to carry on, I’m not going to be deflected, I’ll stick to my plan but the trouble is, if the plan isn’t working the right and credible thing to do is to change course.

DERMOT MURNAGHAN:

As we saw with your government in 2008 in terms of the crisis that was going on.

ED BALLS:

And as we didn’t see with the ERM disaster of the early 1990s.

DERMOT MURNAGHAN:

I’m just interested in more specifics though, in terms of a taxation policy, you talk about stimulating growth and helping out the private sector in particular, I mean when we look at Capital Gains Tax, the trajectory this government is talking about is downwards, it is trying to get taxes down, oil and gas taxes we heard in the budget there were to have gone up. What do you think about that? Do you think that is affecting North Sea exploration?

ED BALLS:

Well there are three different things here. First of all Corporation Tax …

DERMOT MURNAGHAN:

Sorry, I meant Corporation Tax not Capital Gains Tax. Is Corporation Tax going in the right direction?

ED BALLS:

It is quite an important distinction this. Corporation Tax they cut, we when we were in government cut Corporation Tax. They’ve cut Corporation Tax by abolishing the investment allowances, I’m not sure if that’s that wise but if you can get Corporation Tax cuts down to boost investment, good. George Osborne has also raised Capital Gains Tax from 18% to 28%, I’m not sure whether that’s wise, that’s something which we need to keep looking at because it’s important we are encouraging investment in our economy. With the North Sea, out of the blue, at the last minute, they suddenly produced a new rise in North Sea Oil Tax with nothing to offset that with investment. What we’ve seen is companies withdrawing their investment, saying they are going to do less, that could mean less tax revenue from the North Sea. It’s one of those things where if George Osborne had thought about it for a little bit longer, he might have done something a little bit wiser.

DERMOT MURNAGHAN:

So light touches with taxation in those areas but the banks need more of a kicking but the government say well look, our annual levy amounts to more than your one-off taxes.

ED BALLS:

Well look, fact, the banks are having their taxes cut this year compared to last year. In the last year we put in place a Bank Bonus Tax of £3.5 billion, this year George Osborne is replacing that with a tax of just around £2 billion. Why should the banks get a tax cut now when the bonuses are still high and when lending is not moving? What we are saying is look, the levy’s fine but on top of that this year you should replace it … he should repeat the Bank Bonus Tax for a second year, £2 billion, and use that now to get young people to work.

DERMOT MURNAGHAN:

What are we seeing that actually doing? Are these going to be real jobs, real training, real apprenticeships?

ED BALLS:

We’ve said with that £2 billion first of all build 25,000 houses at a time when the private sector house building industry isn’t really building, 25,000 jobs, one and a half thousand apprentices, we could do that now. Secondly, £600 million on a programme to get young people back to work in the private and public sectors, the government has a work programme, the £60 million for young people, they abolished Labour’s Youth Jobs Fund. £60 million is less than the government spends in the DWP on stationery, it’s peanuts. A £600 million programme would get 90,000 young people back into work. The lesson of the 1980s is if you have year by year young people out of work, in the end they lose their skills, they lose their drive, it is much harder to turn that round, it is a real scar. We should be avoiding that and that is a proper role for government.

DERMOT MURNAGHAN:

Okay, here we’ve heard spelt out a very real portfolio on this particular issue but can I ask you more broadly, a senior figure of course and would-be leader last year within the party, when we have all these policies reviews going on within your party and people like me asking you well you know, what’s your policy on this, what’s your policy on that? And we hear that there are a lot of people, too many people sitting around scratching their heads, thinking big thoughts, but nothing hard and fast is coming through. Ed Miliband is sitting there are your leader, 250 days into the job, and people are beginning to mutter, what is this party about, what is the direction, how has it really changed?

ED BALLS:

Look, our party is clear about stability and getting the deficit down but in a way which creates jobs and works for the long term. We’re about an economy which is more balanced so that we can have more long term jobs for the future and getting the banking industry to work for our economy. It’s about an NHS which works for people free at the point of use, it’s about an education system which isn’t only for a minority with only those who can afford to pay going to university but we didn’t get everything right, we lost the election, people didn’t feel on housing, on immigration, we were on their side and I think there are lessons from history here. In my view Labour in the 80s was too slow to reassess, I think to be honest William Hague when he lost in ’97 didn’t really reassess at all. David Cameron said well I’m going to set up policy reviews – who did he choose? Peter Lilly, Iain Duncan Smith, they were figures of the past.

DERMOT MURNAGHAN:

But he got those policies together quite quickly and signalled very early on, I don’t want to go …

ED BALLS:

Did he really? David Cameron’s policies? I don’t think he had any policies really when he was in opposition.

DERMOT MURNAGHAN:

But they sent a signal to the public which bore fruit in the general election that he was going to change that party.

ED BALLS:

Look, the signals are important and it is important that we show first of all we’re not arrogant, we’re humble and we know we didn’t get everything right. Secondly, we start our policy review by talking to the public rather than just to ourselves. When we come up with promises, they are promises we can keep and that we stick to them. On the economy, we have been absolutely out there the last year saying they are getting it wrong and the evidence is coming our way…

DERMOT MURNAGHAN:

You’ve been getting out there but what about Ed Miliband? What do you say to the mutterers in your party, and you must be aware that there are mutterers there that say that Ed Miliband is a disaster, he’s not getting the message across. You mentioned the general election, well of course he wasn’t in charge then but of course we’ve had the local elections, the Scottish elections for goodness sake. Perhaps Ed Miliband is not the man to lead you into the next election.

ED BALLS:

Look, after ’97 and 2001 it took a long time, years, for the Conservatives to get an opinion poll lead which then collapsed. Actually we’ve been leading from early in the parliament, we won seats on local election day, we won in Wales. Every new leader takes time and the same thing happened with Tony Blair and David Cameron as well, there are always some people in the party who will say I know but is it going in the right direction? I actually think that on the economy, on the NHS and on crime too, we are highlighting a Conservative government cutting 20,000 police officers and making it harder for us to tackle crime. Ed is leading us in the right direction. There’s more work for all of us to do, we’ve got to be out there and the people have got to say on the economy, on crime, look, Labour are the people standing up for us, they are the party of government who happen to be in opposition. I’m not saying we’re there yet, there is more work to do, but we are going in the right direction.

DERMOT MURNAGHAN:

Okay, well Mr Balls, thank you very much for your time. Ed Balls there, Shadow Chancellor.

ED BALLS:

Thank you Dermot.

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Posted June 5th, 2011 by Ed's team

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