Transcript of interview with Sky News’ Murnaghan programme

DERMOT MURNAGHAN:

Well let’s say a very good morning to the Shadow Chancellor, Ed Balls, and Mr Balls, to many people it is counter intuitive when we are already spending and borrowing so much to want to borrow and spend more to hope for growth?

ED BALLS:

Well the reason why there’s a problem in Europe is that people have discussed the debts of Greece but they have not looked at the importance of growth, without which you can’t get those debts down and the same issue is arising in Britain. Of course the deficit must come down in a steady way but our economy has flat-lined in the last six months, it’s not growing. That’s why the Chancellor is having to admit that borrowing is going to be higher than he expected. In the end, unless you’ve got more people in work paying taxes, the economy growing, it is very hard to get these deficits down. Growth is the key, that’s what Britain is badly, badly lacking now as a result of George Osborne’s plans.

DERMOT MURNAGHAN:

Interesting there, Mr Balls, you link us to Greece because in many of our previous interviews you said the situation in Britain is nothing like Greece. You said given the warnings that have come from this government about the problems with huge deficits and the way that the money markets then regard a sovereign country, so is the answer for Greece and for us to borrow more?

ED BALLS:

The point is that Greece is in the euro and the fundamental Eurozone crisis over the last year, countries which aren’t growing partly because they are in the euro, partly because their debts were borrowed when they thought they could have European levels of interest rates. Britain is not in that position thankfully because we decided not to join the euro, that’s why well before the last general election our interest rates were low and falling, because we weren’t in the euro, we weren’t in that trap. What George Osborne has done is misread that fact, he’s decided to put us into a new Greek-style trap, not because we’re in the euro but because the economy is not growing and the fact is that on Tuesday simply to be on track for his plans, the economy has got to grow by 0.8%. I don’t hear many people in the City saying that’s going to work and if it doesn’t work, it undermines his credibility, it’s harder to get the deficit down. We are making the mistake, even though we don’t have to, of undermining growth. We have the fastest cuts of any country other than Greece in all the world and the fact is, it’s not working Dermot, that’s the challenge the Chancellor should be grappling with at the moment.

DERMOT MURNAGHAN:

Well everyone accepts those forecasts, certainly 0.8% would be at the very highest end of expectations, you’re right, I haven’t seen anyone predicting that but you would accept would you not that yours is a risky strategy too? You talk about interest rates and about 20% of Britain’s debts is index linked, is linked to those interest rates. If those go up and we continue to add to that debt, then more and more money is spent servicing it.

ED BALLS:

Being a good Chancellor is about understanding the different risks you face and planning for them. What we’ll hear from the Chancellor on Tuesday is that the world is dangerous because of the euro or because of America or because of high oil prices. That is exactly why I argued last autumn, in August actually, that we needed to have a sensible and careful approach to deficit reduction here in Britain. The thing I said was if the world is building for a hurricane, that’s not the time to undermine the foundations of your own house. That’s what George Osborne did. The reckless thing to do was to accelerate the pace of deficit reduction, the very reckless thing to do was to raise VAT in January which pushed up inflation which depressed confidence, which hasn’t worked. I think the cautious thing to do now would be for George Osborne to say for a temporary period he will reverse the VAT rise. The cautious thing to do is to say that we will keep reducing the deficit but in a more steady way, in a more careful way because if not, if the economy is not growing, it gets us into years potentially of slower growth than we should have, of squeezed living standards as well as those higher utility bills people are facing. Our economy won’t be investing while others are powering ahead.

DERMOT MURNAGHAN:

But do you not believe, Mr Balls, let’s look at that VAT cut you’re calling for, so that’s 13 billion or so a year instantly on the top line, more borrowing to fund that. Doesn’t that then put us in danger of being focused on by the markets outside that Eurozone group of the so-called PIGS – Portugal Ireland Greece and Spain – the likes of Italy, they start looking around the markets for other potential victims. If we keep borrowing more, that puts us in their target.

ED BALLS:

Well that is the argument George Osborne wants you to fall for. Economically it is complete nonsense to make that argument. The reason why there is a Eurozone crisis is because countries are in the euro and we are not. What the markets want is a credible plan to get the deficit down and a credible plan means a plan with political support and which works. George Osborne’s plan has got political support from his coalition partners but it’s not working. The thing which would undermine market confidence is the economy flat-lining, not growing, taxes coming in lower, borrowing being higher. I think the more George Osborne says he is just going to plough on regardless, the less credible that he will be. At least Vince Cable today has said the economy is worryingly weak, even though he can’t face up to the need for a change of course. George Osborne doesn’t even recognise that weakness. I have to say, for the markets, a Chancellor who seems to be out of touch with what is happening in the actual economy, that’s the thing that will undermine his credibility as well as the jobs and the living standards for people in our country. There is a choice, it doesn’t have to be this way. George Osborne has made a risky and reckless choice and in economics, the sooner you can, you should change course.

DERMOT MURNAGHAN:

Okay, I want to get on to Europe in detail in a moment but let me run past you, and I am interested in your response, into one of the excuses we are pre-hearing about these low GDP figures, the Royal Wedding, those weekends over Easter, they affected productivity. I mean they must have done.

ED BALLS:

There is no doubt that part of the reason that our economy has been weaker in the last nine months is potentially that lost Bank Holiday – although blaming the Royal Wedding is a bit odd if you ask me – the slow-down in America, the Eurozone crisis, the high oil prices but why is it that Britain has been hit harder than pretty much any other big economy? The reason is that when the Chancellor should have been more cautious, he recklessly had the fastest and biggest cuts – too far and too fast – compared to any other economy. As I said last autumn, if there is a hurricane brewing don’t undermine the foundations of your own house. That’s what George Osborne did and it’s not just our economy and GDP, this is families who are less likely to be in work, who will have lower living standards, a deficit which will be harder to get down because of his choice. There is a credible alternative, a more balanced and careful approach, that’s what he should take. The problem is his coalition partners are so locked into Plan A they can’t see the case for Plan B. I think most people in the country see the case for Plan B very clearly indeed.

DERMOT MURNAGHAN:

Let me ask you about what you were saying about the Eurozone and all the turmoil it’s been going through, particularly when it comes to Greece. I’m trying to put together the two sides of your argument. You have been criticising George Osborne again and the government for not having a seat at the table as those Eurozone discussions were taking place on the 2nd bail out for Greece, yet we’ve heard you before and we’re hearing you today saying it’s a jolly good thing Britain isn’t in the euro.

ED BALLS:

Not being in the euro was exactly the right call for Britain ten years ago but that doesn’t mean that we should walk away from the table when big issues are being discussed in Europe which affect us. That wasn’t the approach which Ken Clarke took over the stability pact in 1996, that wasn’t the approach that Norman Lamont and Nigel Lawson took on big European issues in the years before, nor was it what Gordon Brown and Alistair Darling did. The fact is that George Osborne and David Cameron are not only not at the meetings but they are not even asking to be at the meetings even though millions of jobs and investment in Britain depends upon whether the Eurozone leaders make the right call. Listen I’ve been …

DERMOT MURNAGHAN:

But Mr Balls, just on that point, it was a Eurozone meeting, we’re not in the euro. Britain goes to plenty of other meetings with Europe when it comes to economic policy, it goes to IMF meetings of course as well. It was a Eurozone meeting though this one.

ED BALLS:

Look, that’s the Treasury excuse, I think it’s a very feeble excuse. In the past there would be Eurozone meetings and full meetings of the European Unions, that seems to be happening less now but there have been times when British leaders have gone to the Eurozone meeting. As I said, Ken Clarke himself was formative in making these arguments even though Britain wasn’t going to join in the first wave. Whether Britain gets this right or wrong, and I’m very worried that we’ve had drift in the Eurozone and they have still not really faced up to the challenge, it matters to Britain. We should be there. David Cameron and George Osborne seem to have either decided that if they ignore it, it will go away or they have been distracted by phone hacking, although that’s only been the last couple of weeks and this has been going on for a year. What I think is really going on, as I argued today in the Independent on Sunday, is that David Cameron and George Osborne are using this crisis in the Eurozone to say listen, maybe Britain is better off out of this entirely. David Cameron said to his backbenchers last week we should look at renegotiating the Treaty, the danger is that that means that jobs and investment in Britain will be lost because lots of investment comes to Britain because we are part of that wider single market. Already businesses are saying to me we are not really seeing the government punching our weight in Europe. I think having a British government which doesn’t want to be at the meetings, is happy to stand aside, I think that could be very risky for the future of our country and that is true out of the Eurozone.

DERMOT MURNAGHAN:

It’s interesting you said there, you mentioned the distraction – important as it is – of phone hacking, of course quite an introspective story when it comes to the global economy and the dangers you’re highlighting there. Do you think it was a missed opportunity of Labour then to focus on that in the emergency debate on Wednesday?

ED BALLS:

Actually no, not at all. I think that most people will agree that the phone hacking scandal, the problems in the Metropolitan Police, the problems at News International but also the questions in Downing Street, these go to the heart of our democracy, they go to the kind of country we are. Ed Miliband has been quite right to raise those issues but the art of good leadership is to fight crises at home and lead abroad and what I’m worried about is that David Cameron and George Osborne have spent so much time fighting to save their own reputations here, they’ve not even been talking about the big international crises in America and in particular in Europe and my fear is that they see a domestic political advantage with their own Conservative backbenchers. So the hacking issue is very important, it doesn’t explain why for a year George Osborne has been keeping his distance from the Eurozone. I think in the autumn he thought he would be able to say their policy hasn’t worked, ours has succeeded. The problem is his economic policy in Britain is now failing as well as we were discussing earlier. So I don’t think phone hacking is an excuse for leadership on the international stage from David Cameron and George Osborne.

DERMOT MURNAGHAN:

Just while we’re discussing phone hacking, reputations and phone hacking, you mentioned Mr Cameron and Mr Osborne when it comes to that. Can I ask you about your old boss and presumably still friend, Gordon Brown? We saw how angry he is about the whole issue of phone hacking and intrusions into his personal and private life, do you think it would be wise of him to disclose his dealings while in government with the Murdoch’s and News Corporation? I know Mr Miliband has disclosed those, Mr Cameron has and Mr Blair had those disclosed for him by Gordon Brown but Gordon Brown stands there alone when he was Prime Minister of not letting us know how often he talked to the Murdoch’s and News Corporation.

ED BALLS:

Look, there’ll be full disclosure. George Osborne is apparently trying to disclose his dealings. I will do the same for me and I’m sure in a judicial inquiry these questions will be asked of every politician, including past Prime Ministers, to give that information. The important question though is two things, first of all the question of the BSkyB deal and did David Cameron make promises to News International executives at Christmas? That’s not something Gordon Brown has been accused of doing or Tony Blair. Secondly, neither Gordon Brown or Tony Blair brought in to Downing Street a media adviser who had already been forced to resign from the News of the World because of these allegations. I think the position of David Cameron and George Osborne is materially different but every politician is going to need to do things differently in the future and also answer these questions at a judicial inquiry. I don’t think Labour politicians have anything to hide from this and I hope that will be true of all politicians across all parties.

DERMOT MURNAGHAN:

Mr Balls, many thanks. Ed Balls, Shadow Chancellor there.

ED BALLS:

Thank you, Dermot.

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Posted July 24th, 2011 by Ed's team