The two faces of Ed Balls

During the Labour leadership election, many people were impressed by Ed Balls' apparent conversion to a social democratic economic settlement as espoused in his Bloomberg speech.

But since then Balls has committed a Labour government in 2015 to sticking with Tory spending plans for at least the first year. He has also said that Labour will not promise to reverse Tory cuts, and that Labour would have to make more in office. He has supported the public sector pay freeze, while Ed Miliband somewhat contradictorily waxes on about the cost of living crisis.

This morning the media was filled with similar tough messages, briefing ahead of Balls' speech at the Fabian Society, including the parliamentary garbage that "Balls will promise to legislate for new fiscal rules within 12 months of the general election, including a commitment to a budget surplus by the end of the parliament". Legislate for it? Really? Will the chancellor be surcharged if the target is not met? Or will a technocrat be installed to make cuts? It really is nonsense. On the upside, it should be noted that Balls is committing to a current account surplus, which allows for borrowing for capital investment - see 'Borrowing for Growth - some advice for Ed'.

Nevertheless, like any wannabe chancellor, Balls knows how to pull a rabbit out of a hat. And so the tough, 'we'll enforce austerity too' message will be overshadowed by a debate about a modestly higher rate of income tax on a few high earners. It is very welcome that Balls has committed to restoring the 50% tax rate on those earning over £150,000. It was probably the most popular policy in Gordon Brown's premiership.

What is also welcome, and will hopefully be widely reported, is that Balls also said:

"The latest figures show that those earning over £150,000 paid almost £10 billion more in tax in the three years when the 50p top rate of tax was in place than when the government conducted its assessment of the tax back in 2012"

This corrects the crap put out by the Treasury in its dodgy dossier of the 2012 Budget. Both the move to pledge to restore the 50% rate and the analysis is welcome, and hints at a return to '
Bloomberg Balls'.

However, before Labour activists start getting weak at the knees about a return to some form of modest social democracy, Balls also told the Fabian conference that Labour supported the benefit cap, the public sector pay freeze, thought public utilities belonged in the open market, and that universal winter fuel payments for pensioners should be means-tested.

We've seen the two faces of Ed Balls today in one day. Capitulating to Osborne, the financial markets and the Murdoch media this morning, while throwing a modest redistributive morsel to the left at lunchtime. Bon appetit!

Recovery? What recovery?

by Luke James

Unions reminded backslapping Tory leaders today that Britain is in the grip of the worst economic crisis in a century despite 0.6 per cent growth in the last quarter.

Tiny boosts in construction and manufacturing sector were partly behind the slight respite for the battered economy.

Smug PM David Cameron claimed on Twitter that the figures showed Britain is "on the right track" and insisted his government is "building an economy for hardworking people."

Tory Chancellor George Osborne said Britain's gross domestic product (GDP) was "better than forecast" but failed to mention that it is still 3.3 per cent below pre-recession levels.

TUC leader Frances O'Grady reminded the pair that the economy has grown half as much as they boasted it would when they cobbled together the Con-Dem coalition in 2010.

"It's a measure of how poor the economy is faring that this level of growth is being welcomed," she said.

"With workers in the midst of the longest wage squeeze since the 1870s and unemployment still over 2.5 million, it certainly doesn't feel like a recovery to many people."

Labour shadow chancellor Ed Balls pointed out "this is also the slowest recovery for over 100 years" despite the fractional shift forwards.

He said Britain would need to seal 1.3 per cent growth every quarter for the next two years "simply to catch up all the ground we have lost under David Cameron and George Osborne."

Overall output in construction and manufacturing remains more than 10 per cent below pre-recession levels despite progress in the last quarter.

Manufacturing recovered by 0.4 per cent after slumping consecutively for the last six quarters and the 0.9 per cent rise in construction is eclipsed by the 1.8 per cent fall in the first quarter.

Construction union Ucatt labelled the figures "disappointing" and general secretary Steve Murphy reissued his call for "urgent" investment in infrastructure projects and social housing.

There was also a 0.6 per cent growth in the service sector but concerns were raised that companies are hoarding billions of pounds that could be invested to spark real growth.

Left Economics Advisory Panel co-ordinator Andrew Fisher said privateers have amassed the surplus, equal to 6 or 7 per cent of GDP, thanks to successive cuts to corporation tax and by slashing workers' wages.

"Companies are quite logically refusing to invest substantially in new products, services or jobs at a time when consumer demand is depressed by falling living standards," he said.

This article first appeared in the Morning Star

Osborne's 45% tax rate has already cost us billions

When George Osborne announced he would slash the top rate of tax from 50% to 45% - he made some ridiculous claims about how the 50% tax rate (in effect for only one year) had not raised much money (see point 2 of this post).

It was clear that £16 billion of tax had been brought forward (mostly in high earners' bonuses) to avoid falling under the 50% rate.

Today it became clear that same thing seems to have happened in reverse: to avoid the 50% tax rate the bonuses of the highest earners have been deferred to fall under the 45% rate.

The Morning Star reports:

"Britain has been conned out of billions of pounds by scheming bosses who put off their bumper bonuses until after bankers' mate George Osborne slashed the top rate of tax"

Indeed. The evidence is clear from table in the ONS Labour Market Statistics released today which shows that compared with a year ago finance sector bonuses were up 75%, in construction up 63%, and in the service sector up 52%.

Given any pick up in the economy is only marginal - and in some sectors non-existent - then it is patently obvious that businesses have deferred bonuses (largely the preserve of the top earners) to collectively avoid billions in tax.

As I told the Morning Star:

"Just as bonuses were brought forward to avoid the 50 per cent rate when it came in, so now bonuses from last year were deferred to avoid paying it again."

"At a time when the coalition is failing to reduce the deficit and has jacked up VAT on all of us, this tax cut for the highest 1 per cent of earners is a disgrace.

"These figures show that Labour would be right to restore the 50 per cent rate and to do so without notice to prevent avoidance through income-shifting."

And indeed to his credit, one of the few sensible things that Ed Balls said last week was that Labour favoured "keeping the 50p tax rate" - and let's hope he meant 'restoring' too should Labour get back in office in 2015.

Laughably the Treasury "dodged the evidence", the Morning Star reports - and instead commented that the 50p tax rate was "not effective at raising revenue" - which is a spurious claim given the billions of income shifted forward and then back to avoid it ... something that would not have been possible had the tax been in place for consecutive years, without the announced reduction.

So there we have it, the rich dodge their taxes thanks to Osborne's forewarned tax cut, the Treasury dodges questions and denies the evidence that contradicts Osborne ...

Unemployment and its consensus economics

Figures out today show unemployment has risen again over the last quarter by 118,000 to an 18 year high of 2.69 million. The unemployment rate is now 8.4%.

But even these grim figures don't tell the full horror: if you add those who are working part-time who want full-time work, and those in temporary jobs who want permanent work, it means 4.6m are looking for work.

Sadly the number of vacancies in the economy has declined by 18,000 over the last year to just 463,000: this means there are, on average, ten people chasing every job.

For young people, the picture is even more grim: youth unemployment rose to 22.3% - a new record high. The number of 16 and 17 year olds out of work hit a staggering 38.4%, while nearly a quarter of a million 16-24 year olds have been unemployed for over a year.

This is an absolute condemnation, proof beyond reasonable doubt, that austerity is failing - and yet Ed Balls and Ed Miliband have just embraced it. The latter embarrassed as David Cameron quoted the former back him, "we’re going to have to keep all these cuts" at Prime Minister's Questions.

Now, you might make all sorts of arguments about the Eurozone, unseasonal weather, or that rioters have scared away shoppers, but the data doesn't lie. If the above isn't proof enough, consider this: in the past year UK unemployment has risen by 0.5%, Eurozone unemployment by 0.3%.

This is coming from George Osborne's homegrown economic disaster: in the last quarter there were 67,000 public sector job losses, compared with only 5,000 created in the private sector (four times as big). That is having a disproportionate impact on women, for whom unemployment has shot up by over 20% in the last year.

Despite allegedly ringfencing health and education, in the last quarter alone 8,000 jobs have been lost in the NHS and 30,000 in education - the majority of whom will have been women.

Pay restraint is also having its effect: with the average pay increase just 1.9% over the last year, while inflation is at 4.8%. Osborne's pay freeze, to be followed by pay restraint at a maximum of 1% is now endorsed by Ed Balls.

Yet Balls-the-credible said at the weekend, "There is no way we should be arguing for higher pay". Really Ed? And this man was considered the economics brains behind Gordon Brown.

That pay restraint is having a knock-on effect on the private sector because it is hitting disposable incomes. It also explains why people are increasingly falling into arrears and defaulting on loans and mortgages.

Austerity isn't working. The cuts are wrong and need to be opposed and reversed or we will have entered a death spiral a la Greece by 2015.

Two Eds aren't better than none

It's been a demoralising spectacle watching senior Labour politicians attempt to announce their 'fiscal credibility'.

Far from being on the side of the economics gurus, the two Eds have lined up with George Osborne as austerity enthusiasts - to be condemned by Nobel Prize winning economist Joseph Stiglitz.

The last time we had a consensus such as this was the 1930s, and Unite general secretary Len McCluskey was right to invoke the spectre of Philip Snowden in his Guardian article today excoriating the two Eds.

McCluskey's riposte was in response to Ed Balls' Fabian speech on Saturday, and various media interviews, during which he said: "There is no way we should be arguing for higher pay", and supported the pay freeze followed by pay restraint policy of the Tory-led coalition.

Indeed with failing consumer demand and rising living costs, why would higher pay be important? Best to just drive wages down to ensure what? More loan and mortgage defaults, less consumer demand and VAT revenues, lower income tax revenues, more stress, anxiety and suicides (that inevitably accompany money worries).

Ed Miliband went on the offensive via Twitter today (as Len McCluskey started trending). Ed tweeted:

"Len McCluskey is entitled to his views but he's wrong. Im changing Labour so we can deliver fairness w less money.That means tough decisions"

Less money? Really? Rolls Royce and Bentley sales are up over 30% in the last year, while executive pay shot up by 49%. The tax gap is £120bn, the money's there - you just need to get it.

Tough decisions? Really? Why not take a 'tough decision' to scrap Trident, cancel Osborne's proposed reductions in Corporation Tax or raise the 50% tax rate to 60%?

So the two Eds weren't being credible, just capitulating to the Tories failed economics of austerity. They weren't making 'tough decisions' either, just ones already written for them by the leader writers of the Times and the Telegraph.

Why has Labour not supported the Robin Hood Tax?

Thursday's Morning Star reported that the Labour frontbench failed to back a Labour backbench amendment to the Finance Bill that would have forced the government to report on the feasibility of introducing the modest 'Robin Hood' Tax on financial transactions.

The parliamentary debate can be viewed via Hansard, and I particularly recommend the moving speech by John McDonnell MP (excerpt below) but what is shocking is that such a moderate proposal with such widespread appeal was opposed by the Labour frontbench. In fact only 25 MPs voted for it, and they were:

Gregory Campbell (DUP), Ronnie Campbell (Lab), Jeremy Corbyn (Lab), John Cryer (Lab), Frank Dobson (Lab), Mark Durkan (SDLP), Jonathan Edwards (Plaid), Andrew George (LD), Kate Hoey (Lab), Kelvin Hopkins (Lab), Stewart Hosie (SNP), Elfyn Llwyd (Plaid), Caroline Lucas (Green), Angus MacNeil (SNP), William McCrea (DUP), Alasdair McDonnell (SDLP), John McDonnell (Lab), Andrew Miller (Lab), Austin Mitchell (Lab), Margaret Ritchie (SDLP), Angus Robertson (SNP), Dennis Skinner (Lab), Mike Weir (SNP), Eilidh Whiteford (SNP), Hywel Williams (Plaid), David Winnick (Lab) and Mike Wood (Lab).

The question John McDonnell MP rightly asks is why the Labour frontbench has refused to support calls for Robin Hood Tax. Another opportunity to lead a progressive, popular campaign lost. As this was a Treasury issue, why did shadow Chancellor Ed Balls not back it? And why has Ed Miliband missed an opportunity to support this policy and place Labour back at the head of a progressive coalition?

John McDonnell: I can think of no better day on which to debate this issue, having seen the pictures shown on our television screens last night and today of the tragedy that is taking place in the horn of Africa. This morning, Radio 4 broadcast the story of a family—parents with one child—who had walked for miles to the aid station, only to find that the one-year-old child had died as a result of suffering the drought and famine. I also commend last night’s “Dispatches” programme, presented by Jon Snow, which identified the activities of Rachmanite landlords in west London. Some of those landlords operate in my constituency, and the matter has been raised in the Chamber in the past. It demonstrates the poverty that still exists in this country.

On a personal note, let me say that this morning I received letters from children at Cherry Lane primary school in my constituency as part of their campaign to encourage politicians to think about how we can fund education in the developing world so that children there can go to school. That is what my proposal is all about.

When the transaction tax was relaunched last year as the Robin Hood tax, it was supported by a wide range of churches and religious organisations. I will not name them all, but let me give Members a flavour of them. They included the Trades Union Congress, Crisis, Action Aid, Article 12 in Scotland, Barnardo’s, the Catholic Fund for Overseas Development, Christian Aid, Church Action on Poverty, Comic Relief, the Church of Scotland’s Church and Society Council, the Christian Socialist Movement, the Disability Alliance, the Ecumenical Council for Corporate Responsibility, EveryChild, Family Action, Faith2Share, Friends of the Earth, the General Assembly of Unitarian and Free Christian Churches, Greenpeace, Oxfam, Quaker Peace and Social Witness, Save the Children, Tearfund and the Salvation Army.

That was the largest alliance of civil society organisations that we have seen in generations campaigning on a single issue, and, as you know, Mr Speaker, they came here last month. Twelve hundred people came to Parliament, and met us in Central Hall over a cup of tea. The event was organised in particular by Oxfam, Action Aid, Save the Children, Tearfund, CAFOD and Christian Aid, and their message was simple: 1 billion people have no access to clean water and 2.5 billion lack basic sanitation, and it is time for change and action.

Read full speech and debate and online

Fence-sitting Labour needs a push to the left

Last week, on 22 June, MPs debated the economy. It was an 'opposition day' in the House of Commons, which means the opposition party tables a motion for debate on a subject of its choosing.

The Labour frontbench chose the economy - neatly on the first anniversary of George Osborne's 'Emergency Budget'. Their motion is set out below:

That this House notes that on 22 June 2010 the Chancellor announced his first Budget with a target to eliminate the structural deficit by 2015-16 through an additional £40 billion of spending cuts and tax rises, including a VAT rise; further notes that over the last six months the economy has not grown, in the last month retail sales fell by 1.4 per cent. and manufacturing output fell by 1.5 per cent. and despite a welcome recent fall in unemployment, the Office for Budget Responsibility predicts that future unemployment will be up to 200,000 higher than expected; believes the Government’s policies to cut the deficit too far and too fast have led to slower growth, higher inflation and higher unemployment, which are creating a vicious circle, since the Government is now set to borrow £46 billion more than previously forecast; calls on the Government to adopt a more balanced deficit plan which, alongside tough decisions on tax and spending cuts, puts jobs first and will be a better way to get the deficit down over the longer term and avoid long-term damage to the economy; and, if the Government will not change course and halve the deficit over four years, demands that it should take a step in the right direction by temporarily cutting VAT to 17.5 per cent. until the economy returns to strong growth and by using funds raised from repeating the 2010 bank bonus tax to build 25,000 affordable homes and create 100,000 jobs for young people.

Very moderate stuff - and still the 'too far and too fast' line. However, it would be foolish not to recognise that this is progress from the "cuts deeper than Thatcher" line of Alistair Darling barely more than a year ago.

The pledge to cut VAT and re-institute the bank bonus tax should be welcomed as the modest, progressive measures that they would be - esepcially since they advocate hypothecating the revenue into affordable house-building (though not council house-building) and job creation to tackle youth unemployment.

However trade unions and Labour Party members still have much further to go to move the party to a more radical position of 'no cuts' - although very welcome that Unite's Executive has passed this very clear policy.

There is the sense of a real battle going on within the Cabinet at the moment. It has also manifested itself over the 30 June strikes with Ed Balls initially breaking cover to say "The trade unions must not walk in to the trap of giving George Osborne the confrontation he wants to divert attention from a failing economy". He neither supported nor condemned the strikes.

On Saturday, Ed Miliband told the Guardian the strikes were a "mistake" and said "I don't think the argument has yet been got across on public sector pensions as to some of the injustices contained on what the government is doing. Personally I don't think actually strike action is going to help win that argument and I think it inconveniences the public" - seemingly not having looked at polls showing 48% of the public supported public sector workers striking to defend their pensions, with only 36% opposed.

But later on Saturday, Peter Hain saluted trade unions "fighting for justice" in the public sector, and followed that up with an appearance on Andrew Marr where he said "One of the things that's led to this situation is the government's reckless and arbitrary attack on public sector pensions without being willing to negotiate. I mean here's Michael Gove coming on your programme and he's urging parents to break strikes. That's not a responsible way of resolving these situations". He also added it was not for Labour to urge union members to go to work saying political leaders should be trying to resolve strikes, not applauding or condemning them.

The question Labour is failing to clearly answer is 'which side are you on?' Labour continues to sit on the fence. It needs members and unions to give it a firm push to the left.