Today programme interview on economic policy and why jobs must come before higher pay

James Naughtie: This is a big change. You’ll blame it on the government because you argue that Mr Osborne has not handled things as you would have handled it. But the truth is, that you accept, do you not, that if you are going to be credible with the public, you cannot promise to have a wholesale policy of reversing cuts?

Ed Balls: I can’t make promises I can’t keep. I can’t allow Labour to be seen in any way as the party of the short-term quick fix option. It’s going to be very hard. We have consistently said to George Osborne – I have over the last 18 months – that of course you have got to get deficit down, of course there have to be tax rises and spending cuts but he’s going too far and too fast. It won’t work. Unemployment will go up. That’s where we are. That’s going to continue I fear but I can’t promise to people that I can just wave a magic wand and be able to spend more and tax less. I cannot make commitments for three years’ time. I won’t do that. That wouldn’t be credible.

JN: The point here is that of course you have been making the critique that you have just outlined.

EB: And will continue to.

JN: That’s your job in the opposition, but what you haven’t been doing until now is to accept the discipline that comes with that. You have been attacked for it from the government’s side and you have been questioned in quite tough terms on that. What you have said now is that you accept that you can’t say all that you have said and not acknowledge that you have to come clean on living with a cut in public sector pay and a view on cuts that you will not promise to reverse anything until you say where the books are.

EB: I have said these things to you and to others consistently over three years. I was the one who set out £1 billion of education cuts in 2009. Alistair Darling announced a pay freeze. George Osborne continued that. We have never ducked difficult decisions but we also said that there was a question of balance about how fast you go. The problem now is that George Osborne, he won’t listen to my urging to take a more sensible approach. He won’t listen actually to the rating agencies now telling the eurozone that austerity is self-defeating as they have done overnight. He is not listening and therefore we are having to deal with the consequences. Just on the pay point, George Osborne clearly hoped that he would be able to have tax cuts later in the parliament and rising public pay. It’s not going to happen because of his failures but people might expect me to come along and say of we’ll back higher pay. It’s a question of priorities. I can’t say to private and public workers or to the country Labour would put higher pay before jobs when unemployment is so high. I have to be honest with people about the choices we’ll face.

JN: You used the word honesty and what honesty means is this: that public sector workers will have to accept real cuts in their pay between now and 2013. Simple as that.

EB: And it’s really hard.

JN: That’s the consequence of what you are saying.

EB: And private and public sector workers have already been facing those cuts. I’m afraid it’s going to continue and it’s partly because of the VAT rise and the cuts in tax credits and the higher inflation but it’s also because the economy is stagnating. I am not the chancellor; I can’t turn round a stagnating economy. George Osborne will not listen to me urging to be more balanced. I can’t say to people despite all of that the priority will be higher pay over jobs in the public and private sector. That would be irresponsible and I must be responsible and credible in what I say.

JN: You are saying that it’s an option that is simply not available to anyone.

EB: It’s not available to anyone I’m afraid. It would have been tough on pay for any government, it’s going to be tough on pay for any government. It’s going to be tougher because of Osborne’s mistakes. I can’t promise to reverse that now.

JN: Another consequence of this, you have been very clear about what you do as in public sector pay, you have talked about honesty. You have talked about not promising what you can’t deliver if you were ever to be in power. Let’s get on to the follow-up to this which is quite clear. Every time the government stands up and says we’re going to cut this, we’re going to cut that, you will have to be as clear as you say you are being this morning. Should more benefits for example be means tested?

EB: Let me just be absolutely clear what I’m saying. I can’t now make commitments for three years ahead to reverse tax rises or to increase spending when we don’t know the economic position. But I also think that the spending cuts that George Osborne is doing now are not only too fast and in some cases unfair but in some cases totally counter-productive. If you cut the Future Jobs Fund and Educational Maintenance Allowance and you have youth unemployment above a million that means higher benefits bills, higher borrowing. We are going to oppose unfair cuts, destructive cuts and we are also asking to take a more balanced approach and support the economy and jobs now. But my point is, Jim, I can’t make commitments now about what we are going to do in three years’ time when that would be irresponsible. I don’t support spending cuts which I think are actually going to be counter-productive and destructive.

JN: You are going to make a case-by-case argument, that’s clear, but it’s going to involve you saying from time to time, the government is right, I agree, we might not cut quite as deep as that but you are going to have to if you are going to fulfil the sort of promise that you are making this morning. It does mean that day by day week by week when people say where do you stand you can’t dodge it. You can’t duck it. You are going to have to be straight, cut by cut.

EB: Yes, 100 per cent. That’s what we have already tried to do. It’s hard in opposition when you haven’t got all the detail and don’t know where the economy is going to be. But one good example though, we said and say based upon independent research that the police budgets could be cut by 12 per cent without losing police officer numbers. Labour would do that cut. But a twenty per cent cut front-end-loaded will lose 16,000 officers. That is a wrong decision from Theresa May and David Cameron which will damage crime-fighting in our country. That is clear. Labour is saying of course there is going to be a cut, don’t go too far in a way that is going to be destructive. The same is true on jobs. The same is true on other parts of public spending as well. I made clear that we could cut some education spending but not the biggest cuts since the 1950s.

JN: Is there any where that you would go further that the coalition?

EB: We will need look at these issues in the coming weeks and months in the run up to the general election. I absolutely don’t rule out going further than the coalition where I think they could –

JN: [Interrupting] You think about these things day and night. Give us an example.

EB: I think spending £2-3 billion on another huge re-organisation of primary care trusts and the National Health Service is a massive waste of money which will also damage health care and see waiting times rising. That’s one example. I think the £29 billion or so more we are now spending on unemployment benefits is a mistake because George Osborne should be getting unemployment down.

JN: You are opposing Iain Duncan-Smith’s cap on benefits?

EB: We haven’t opposed the idea of a cap.

JN: This is an interesting point because you talk about differences in the cost of living around the country. What about a regional cap?

EB: The problem we have got is that this cap has no taking account – as the benefit system finds hard to do generally – of different variations. That’s why Eric Pickles, the local government minister, said that we will end up with more homelessness if we apply Iain Duncan-Smith’s cap. But there is an important point here and a balance to be struck. Take the issue going back to pay, I think public sector pay should be done in a fair way. The one per cent should be fair to be people at the bottom. Secondly, I do think you need to take into account what’s happening in employment and labour markets up and down the country. But George Osborne’s plan to rip up the pay review bodies and go to local pay would actually be unfair and more expensive and make reform harder. Sometimes if you want restraint and discipline you need to have something like the independent pay review bodies.

JN: Do you see this as a moment where you want to be seen to be making a change. Some of us are old enough to remember Gordon Brown before the 1997 election talking about accepting Conservative spending plans as they had been laid out for the next period and it was seen as quite a moment. Do you want this to be a moment? Are you making a change quite deliberately and publicly?

EB: I want people to hear what I am saying and my commitment to rigour and discipline and spending control.

JN: You have been forced into it.

EB: No. The decision on spending in ’97, like Bank of England independence, like using the 3G mobile phone auction to repay debt, decisions I was involved in – tough decisions – Gordon Brown could not have done that four years earlier. These things are about timing. You have got to be the answer to the question people are asking. Last year I could have said these things. Nobody would have cared because they all believed George Osborne and David Cameron’s plan would work. Their plan is not working. It is failing. People are saying for the first time: is there a Labour alternative and is it credible? I have got an alternative but I have got to show it’s tough and credible. That is what I am doing today. As I said to you a moment ago, the rating agencies are saying today to the eurozone, austerity alone is self-defeating. We are not in the euro. Why is George Osborne doing the same self-defeating austerity too? It doesn’t make sense. We shouldn’t be copying the euro area this time.

-ends-

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Posted January 14th, 2012 by Ed's team