Politics Show interview on Labour’s five point jobs plan, eurozone crisis and executive pay

Ed Balls: Well it’s a funny kind of safe haven to live in when you have unemployment rising to a seventeen year high and when growth has flat lined. I think, look, there’s no doubt that Britain, America, Germany actually, not being in the core of the Euro going wrong are not seeing the higher default premia in their interest rates. But the reason why interest rates are so historically low in Britain isn’t good news. As the head of the National Institute has said, the reason is because our short term interest rates are expected to stay very low indeed because our economy is flat lining, unemployment’s rising and there’s no prospect in the short term of the Bank of England changing course. So the government says we’re a safe haven because of these interest rates. I think most people will look at that, and especially experts who understand these things, and say that’s just another piece of spin from a government trying to divert attention from what their policies have done.

Jon Sopel: Well it’s not just the government spin is it? I mean Standard and Poor’s one of the world’s leading credit agencies have said that – issued a pretty clear warning – that ‘our triple A rating could come under downward pressure if the coalition’s commitment to fiscal consolidation falters.’

EB: Well look, we have to get into a debate here about whether the credit agencies lead the debate or follow. Go back to August when the US had a downgrade from a rating agency, on your argument their long term interest rate should have gone up. Actually, Jon, they fell. And the reason is because people said the American economy is not going to grow. The IMF itself has said, if Britain has a prolonged period of stagnation, undershooting, the government should change course on the deficit. The idea that they are still not doing so and using now this safe haven argument is frankly laughable. A year ago the spin from the government was: our plan will work, the private sector will deliver growth. We’re now in a position where David Cameron, George Osborne, Nick Clegg are desperately trying to tell people a new message that however bad it is it’s all the Euro’s crisis. It won’t wash and it’s very important that you, the BBC, the wider world don’t fall for this argument. The fact is…

JS: Hang on. Are you saying that the Euro – the Eurozone crisis is having no impact?

EB: No, I didn’t say that. Of course it’s having an impact. I warned a year ago if there is a global hurricane you should not undermine the foundations of your house and there is a hurricane going on. But the test is: are the policies of the government making things better or worse? And the fact is they’ve made things much worse because our slowdown happened before the Euro crisis, we’ve grown slower than other European countries, we’ve got bigger rises in unemployment, we are weaker and less able to withstand this latest crisis because of what the government has done. Our exports to the Euro area have gone up by 17%. It’s consumers and businesses who are losing confidence and being hit by this very, very foolish rapid contraction in fiscal policy, trying to cut too far and too fast. They’re the ones who are really, really feeling the heat and the longer this goes on the bigger the pain’s going to be and I don’t think that they should be bailed out by people falling for this argument.

JS: Hold on a second. We have heard from Vince Cable there talking about the need to get growth back into the UK economy. We read in the papers today that there may be £50 billion of investment brought forward for infrastructure projects like roads etc. Do you welcome that?

EB: Well, if it’s true I welcome it. Your first question to Vince Cable was that this is the equivalent of a war in the economy. That is quite right, but after the Second World War we took a number of years to repay our much higher level of debt. The government and Vince Cable have tried to get this done in one Parliament and it is backfiring. It’s leading to higher borrowing as well as flatlining growth. We’ve set out an alternative five point plan which is more balanced on the deficit and actually acts now to get growth and jobs moving. If it is the case the government is now adopting one of those planks by bringing forward infrastructure investment then good. But it’s got to be real. It’s got to actually have a stimulus to the economy. And George Osborne’s talking about 50 billion pounds, as far as I can see he’s saying that’s all going to come from private investment. We had this for a year, this idea that you can cut public jobs, cut public investment and the private sector will take over. They’ve not done it…

JS: I just want to ask you about your plan, how much will your growth plan cost?

EB: Well, we’ve been very clear that one of the elements would be a temporary cut in VAT.

JS: For how long?

EB: Which if we did that for one year would cost 12 billion pounds. We said repeat the bank bonus tax for a second year -

JS: So do you think it should be for one year or five years?

EB: Well, look, it all depends how long it takes this recovery to get moving. I think that if we act now we could get the recovery moving over the next year. A year ago we had a recovery and falling unemployment. Poor Vince Cable, was ignored, the Liberal Democrat manifesto was torn up and the government then decided to go faster.

JS: I just want to stick with your plans, because I’m sure you’d like to talk about your plan. Right, 12 billion pounds from VAT, what about the rest of it? How much will that cost?

EB: The second thing would be a repeat of the bank bonus tax for a second year, raising two billion pounds from bank bonuses to spend on a hundred thousand jobs for young people and housing. That obviously pays for itself. We’ve called for a cut in National Insurance for small firms taking on new employees, which would boost job creation. And, look, the government had a scheme and it’s failed. There’s half a billion for that, that would work very well there. We’ve also said cut VAT for a year for repairs and maintenance to get help for small companies. People think that might cost half a billion pounds, although if you get more growth and more jobs that would then pay for itself. Finally, I’ve said bring forward shovel-ready projects. But you can’t have public investment projects which don’t affect borrowing, which somehow rely upon the private sector. George Osborne is saying 50 billion, there is no meat there. This is deeply irresponsible, the spin won’t work, Jon. We’ve got to hold him to account, we need a change of course, a Plan B, Labour’s plan for jobs and growth, and we need it right now.

JS: One other question, and that’s on executive pay, that Vince Cable is talking about possibly introducing legislation in the new year. Will you be backing him?

EB: Well, if he brings forward legislation we’ll look at it. I have to say I thought Vince Cable was deeply confused in his interview about the past as well as the future. We actually introduced in government legislation, which is on the statute book, which says that every person paid more than a million pounds, their pay and bonus should be made public. The Conservative-Liberal Democrat government have refused to use that legislation. Vince doesn’t need a new Bill, he could do that right now. Why doesn’t he just act rather than prevaricate? We’ve also said – he’s now talked about legislation – to have worker representatives on boards, to have more transparency, voting by shareholders. Quite right, but just get on with it. You can’t sit there and say, I’ve got a problem but then prevaricate about action. On executive pay, on the bank bonus tax, on jobs and growth, on a plan B, we don’t want these interviews which are sort of all over the place and confused. We need some action to get jobs and growth moving and to get our deficit down and we need it quickly. And I’m afraid from that interview today I didn’t see any signs of leadership, action. Just excuses.

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Posted November 13th, 2011 by Ed's team