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Ed Balls Interview, Part One: Dealing With Deficits, Ambitions And Milibands

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ED BALLS
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Ed Balls is the biggest of Labour big beasts. Mehdi Hasan meets the shadow chancellor for part one [below] of an in-depth, two-part interview, on Balls the politician. Why is he playing "footsie" with the Lib Dems? Does he really not "give a toss" about being leader? And would he be willing to give up his job to David Miliband?

On 27 August 2010, in the midst of the Labour leadership election, Ed Balls stood up to deliver a speech in front of an audience of business leaders at the headquarters of Bloomberg in the City of London. The former children’s secretary warned that the danger “of too rapid deficit reduction is that it proves counter-productive: tipping us back into recession, unemployment rising and the deficit and debt getting worse”. Labour politicians, he declared, “must never be afraid to stand outside the consensus – and challenge the view of the Chancellor, the Treasury, even the Bank of England Governor – if we believe them to be wrong.” Balls’ speech was roundly denounced by politicians and pundits on the right; he was labelled a “deficit-denier”.

Today, more than two years later, with the UK having slid into its first double-dip recession since the seventies and with the chancellor of the exchequer on the verge of abandoning his debt targets, Labour's shadow chancellor stands vindicated – yet voters say they still prefer David Cameron and George Osborne to run the economy, over Balls and his boss, Ed Miliband. That must grate? “I think it’s really hard to turn around a election defeat in one parliament,” he says quietly. “It takes two or three parliaments to make that happen…and we’re only two years in.”

We are on a Virgin train hurtling towards Manchester, where the shadow chancellor is scheduled to visit a new business hub with the local parliamentary candidate Lucy Powell. Balls sits across from me in our train carriage, fiddling with his Blackberry. He is in blue shirtsleeves, his top two buttons undone, bits of chest hair peeking out.

LABOUR'S ROAD TO ECONOMIC RECOVERY

Labour, he argues, lost the election in 2010 after a global financial crisis in which the party’s reputation for economic competence took a big hit. He repeats: “That’s tough to turn around.”

But, Balls says, he is an optimist. When he became shadow chancellor in January 2011, after the sudden resignation of Alan Johnson, he told a meeting of the Parliamentary Labour Party (PLP) that “turning around Labour’s reputation on the economy would be a real struggle…but it could be done”.

For the shadow chancellor, “there is no point to politics being the answer to a question people aren’t asking”. For all its intellectual merits and rigour, his Bloomberg speech, says Balls, “wasn’t a question people were asking at that time – the general view from the CBI to the Times to the Financial Times to many voters across the country was, ‘the coalition has a plan, let’s hope it works’”.

It hasn’t worked. Balls was right, Osborne was wrong. Yet the great British public still seem suspicious of the two Eds’ economic credentials. Doesn’t that annoy him? Balls dodges the question. “Step by step, month by month, we are closing the gap, we are making progress, but we still have a long way to go.” He continues: “I want people at this conference to say [the Tories’] plan has failed, borrowing has gone up…and Labour’s now saying things that are different and do I actually think what they’re talking about long and short term can actually make a difference.” He pauses. “That’s not a question people were asking even three, four, five months ago.”

His critics often claim that the shadow chancellor is privately delighted that the double-dip recession he predicted has come to pass; some paint a picture of Balls grinning in his office upon receipt of the latest (lack of) growth figures. “The only people who would ever think that I would smile would be fools, Tory trolls and advisers at the Treasury,” he declares rather loudly, in our semi-empty train carriage. “In the grown-up world, that’s not how people think, that’s not how I think. The emotion I would use is frustration. It’s incredibly frustrating to see a government ploughing on and doing lots of damage along the way… because they’ve boxed themselves in.”

Does he, like me, find the unwillingness of the deficit hawks to admit the error of their ways rather astonishing? “I think” – there is a long pause and as he carefully chooses his words – “it’s very difficult for people who took a very hard view [on austerity] in June, July, August 2010, to sort of say now, publicly, ‘We got that wrong.’” But, he adds: “Whether or not commentators want to say publicly that I, and people like me, were right [about austerity] in 2010, the one thing they cannot do now is discount what we say about what needs to be done now and for the next two years and I actually don’t think they do.”

The shadow chancellor tells me that when he goes to see business leaders now, they say to each other: “You can’t discount what he has to say”. He leans back in his seat, with a look of satisfaction: “I don’t think, to be honest, it was something which would have been said about Labour economic figures at any point in the 1980s.”

Given it is the season of political apologies – from David Cameron on Hillsborough to Nick Clegg’s musically-spoofed contrition over tuition fees – will we see Labour’s chief economic spokesman say sorry for the party’s supposed profligacy during his conference speech? “No.” Why not? He shrugs: “Having authenticity and integrity starts with saying what you believe to be the truth.”

So, no need for a Labour apology on the economy? “A year ago, I stood up and said we got it wrong on City regulation.” But what about the specific issue of public spending, which even some of his colleagues on the Labour frontbench, in private, say they want him to address? He interrupts me: “I have far more colleagues say to me, ‘Labour should stop apologising. Labour should do more to defend our record in government.’” Suddenly, he is in full flow: “There may be people who whisper in your ear or want to be quoted anonymously on the blogs, and who want to take the same line as Conservative Central Office about the past, but they don’t say that to me.”

“David Cameron and George Osborne would like nothing better than for me to say that the reason there was a global financial crisis, the reason that our deficit went up, is because of Labour public spending. But it’s rubbish.” He spits out that last word. “Why would I want to do something that’s bad economics and bad politics in order to make David Cameron happy and to appease a few people [in Labour] who are willing to whisper anonymously in people’s ears but not tell me straight? Why should I say something that is both untrue and which they want me to say when, actually, the financial crisis hit countries which had public spending shares of GDP [that were] 10 percentage points higher than ours and 10 percentage points lower?

Balls is defiant: “The reason our deficit went up is because of what happened to tax revenues, not spending.”

But what about the much-discussed ‘structural deficit”, the part of the deficit which should disappear when the economy recovers? The Institute for Fiscal Studies (IFS) says the UK had the second-highest structural budget deficit in the G7 in 2007. Balls, however, has his pre-prepared answer. “We came into government in 1997 with a country and infrastructure which had been grossly underinvested in for 30 years and which was a drag on our long-term economic potential. And we made a start in 10 years of turning that round… It was a deliberate policy of ours, given our weak capital stock in Britain, for us to say that we would balance the current budget but we would deliberately borrow to invest over the cycle, consistent with keeping the national debt low. It was absolutely not the preferred route of the IMF, who preferred balanced budgets, but we were not a balanced budget party, we were a borrow-to-invest-and balance-the-current budget party.” Therefore, he argues, Britain’s structural deficit was “marginally higher than some other countries. Part of the reason why that was possible was that our national debt in 2007 was lower than America, France, Germany, Japan Italy, all these countries.”

Whether or not you agree with him, it is difficult to be unimpressed by the shadow chancellor’s knowledge and understanding of macroeconomics, his intellectual agility and his command of all the key arguments. It was a 27-year-old Balls, after all, who introduced the then shadow chancellor Gordon Brown to the wonkish concept of "post-neoclassical endogenous growth theory" in 1994, prompting Michael Heseltine to joke: "It's not Brown's, it's Balls'!”

Over the past 21 months, since he assumed the shadow chancellorship, the Labour MP for Morley and Outwood has been making the case for a Keynesian fiscal stimulus, the centrepiece of which is the party’s “five-point plan for jobs and growth” that Balls unveiled in his conference speech in Liverpool a year ago.

BALLS' FIVE POINT PLAN

I make the mistake of trying to catch him out. Can he tell me what Labour’s five-point plan consists of? He reels it off, without hesitation, as if reading from an autocue: “VAT cut back to 17.5% for a fixed period; VAT on repairs and maintenance cut for one year to 5%, cuts in [the] national insurance rate for small firms for all employees; a bank bonus tax repeated for a second year, to build 25,000 houses and guarantee a job for 100,000 people; and genuinely bring forward infrastructure spending now.”

I remind the shadow chancellor that top Keynesian economists at home – such as Ann Pettifor – and abroad – such as Paul Krugman – have criticised his plan for being too modest, unambitious even, given this is the longest British recession since the Second World War. Does he accept that his five proposals wouldn’t make a major difference to our overall output?

“Of course I don’t accept that,” he says, shaking his head. “Of course it would make a major difference. The question is on what scale you’d do it.”

He must have a number, I insist. £10bn worth of stimulus? Or £30bn? Or £3bn? How much extra borrowing and spending? “Well, the VAT cut in and of itself is £12.5bn every year,” he says with a slight shrug. Well, why not put a number on the whole plan then, even if only a ballpark figure? “Look we can’t make a precise judgement about how much stimulus we could do without the information that the Treasury has got.” Isn’t he being evasive? Several leading economists have put exact figures on the size of the fiscal stimulus that they believe our depressed economy needs. “But I’m the shadow chancellor,” he says. Doesn’t that put a bigger burden on him to be explicit and transparent? “No, the opposite of that.” What, to be implicit and shady? “Everything I say has to be correct, calibrated and honest. I don’t have the Treasury’s data…[and] I’m consistently refusing to write a budget from opposition.”

A SHIFT TO THE RIGHT ON IMMIGRATION?

I move the conversation onto the subject of immigration. Both Balls and his wife Yvette Cooper, the shadow home secretary, have been accused by critics on the left of cynically pandering to the right-wing press on this sensitive issue, with tough-sounding and often illiberal statements. In a recent interview on the BBC’s Andrew Marr programme, my ears pricked up when I heard the shadow chancellor say that the “government’s not cutting immigration. It’s going up and that’s an issue”.

Surely, from an economic perspective, isn’t the opposite the case? That a fall in immigration, as even the government’s own Office for Budget Responsibility (OBR) has admitted, harms growth?

Balls fixes his stare on me. “What I was saying is that it’s a big issue for the government’s credibility,” he says, pointing out how the coalition’s cap has failed to significantly cut the number of migrants coming into the UK. He continues: “I think it is also true that unskilled immigration, in the context of the labour market we had at the time, was damaging for wages and living standards… that’s my judgement.”

I point out that there is little empirical evidence to support such a claim. As Jonathan Portes, head of the National Institute for Economic and Social Research (NIESR), has written, “wage growth for the low paid and immigrant inflows don’t appear to be related at all”.

“You have to be careful,” Balls responds. “The evidence always ends up being about averages but, for me, it’s about communities. There is no doubt that, for particular types of communities, for particular types of working people, it had an impact… My particular remark to Marr was about unskilled migration rather than overall migration.”

But does he accept that, overall, immigration and immigrants have been good for the British economy? “Of course.” What about numbers? Are there, in his view, too many or too few migrants living in the UK right now? He hesitates. “Er, I don’t know what the numbers are… The reality is that over the course of this recession, the flow of unskilled migration has fallen.” And? “I think that’s a good thing.”

Some senior Labour sources have suggested that the shadow chancellor wasn’t pleased with his leader’s rather careful speech, back in June, on the subject of immigration and labour markets. Balls is keen to rebut such rumours: “I think [Ed’s] speech was firmly in the same place as me.”

Was he “firmly in the same place” as Miliband on Rupert Murdoch and the phone-hacking controversy? “Of course,” is his instant reply. Really? He looks uncomfortable. There is a long pause. “The question you asked me is did I at the time, and since, support the tough stance on News International and media reform; the answer is yes.” He goes on: “I was actually the person who told Ed Miliband about the Milly Dowler events in a meeting; it came through [on my phone]. I told Ed it was a massive issue, a defining issue, and it was really important he use this moment. So I was totally behind him.” I sense a “but” coming. “But, on many issues, including this one, I, and many others, will say, privately to Ed: on tactics and nuance, these are our views. And the right thing is to do these things privately and not to do these things in public.”

HOW IS (THE OTHER) ED DOING?

What about his leader’s poll ratings? They’re pretty dire, aren’t they? “It is always hard for any opposition leader, shorn of the trappings of office, to establish that standing. Exactly the same problem happened to Margaret Thatcher…and the same thing happened to David Cameron who would have lost the election in the autumn of 2007 if we’d called it for precisely these reasons: because, compared to Gordon Brown as prime minister at that time, David Cameron wasn’t cutting it.”

But the gap between Miliband and Cameron is huge: one recent survey put the latter 40 points ahead on the specific question of who looks more like a prime minister. “You have to be the answer to the question people are asking,” says Balls. “People aren’t asking the question yet: ‘Who should be the prime minister in two and a half years time?’ Therefore, compared to the guy who stands in Downing Street and does it every day, that is inevitably a comparison he can’t win.”

He mentioned Brown so I can’t resist from asking: how often does he talk on the phone to his former mentor? “Rarely.” Ok. Does he text him then? “I don’t think I’ve ever sent a text to Gordon Brown because I’m confident that he would absolutely have no idea how to receive it. He barely managed to master WordPerfect 4.1.”

Is Balls, I wonder, still worried about the “son of Brown” tag? Such questions, he says, rolling his eyes, are “inside the motorway station inside the beltway”. The shadow chancellor thinks voters aren’t bothered by “what happened three, four, five years ago”. Plus, he says, outside Westminster, “most people remember me for being the education secretary and dealing with difficult issues around child protection”.

Will history judge the Brown premiership, which Balls worked so hard to secure, as a failure? “No, history will look back and say that what Brown, and [Alistair] Darling, did in 2007 and 2008 was one of the most decisive [political] acts.”

So is he in fact saying that Brown will go down as one of the great British prime ministers? Aware of how potentially radioactive his ties are to the former premier, Balls ducks the question: “I think the decision [Brown and Darling] made on the economy in 2007 and 2008 will go down as one of the great pieces of statecraft of the past 100 years.”

PLAYING FOOTISE WITH VINCE CABLE

Despite his unfortunate reputation in some circles as a Brownite hitman, and as a loud advocate of dividing lines and so-called Labour tribalism, Balls has been reaching out to the Liberal Democrats in recent weeks. He has promised a wealth tax of his own and called for face-to-face talks on the issue with Vince Cable. During his appearance on the Marr programme, Balls found himself sitting on the couch next to the Lib Dem business secretary. Why is he playing footsie, I ask, with a supporter of austerity?

“I wasn’t playing footsie on the couch, for the avoidance of any doubt,” he jokes. “Vince Cable signed up to austerity and did a 180 degree U-turn because he was told that was what was necessary to be a member of the government. He obviously hoped it would succeed. What I’m saying to him is put the national interest before personal and narrow party interest.”

So, just to clarify, Cable – as Labour’s deputy leader Harriet Harman argued in a recent newspaper interview - is as much to blame for austerity as Clegg? “Vince Cable has defended the last few years as much as anybody, if this continues to go on, and damage continues to be done, then he bears a big responsibility for that. But I also think he’s someone who understands why its failing and can change his mind. I don’t think there’s any possibility of getting Clegg to change his mind but I think there is a chance of changing Vince Cable’s… He’s clearly willing to say to people off the record that he’s worried. I think he should come out and show a bit of leadership.”

Does Balls agree with Harman’s description of Cable as a Tory “accomplice”? “Well, he is an accomplice. He is signed up to an austerity plan that is failing.” But, the shadow chancellor adds, in what appears to be a dig at the deputy leader, “do we glory in our moral righteousness for the next two and a half more years while people continue to pay a price or do we say to decent people, if you’re decent, do something about it?”

But do what exactly? “Right now, if the Lib Dems said, ok, we got this one wrong, and we’re walking out [of the coalition], I think that would absolutely be in the national interest. The whole point of this fixed five year term is that… the Lib Dems have far more power to shape the destiny of this parliament than sometimes they realise.”

It is, in many ways, an astonishing comment – the shadow chancellor is calling for a break-up of the coalition right now, more than two years ahead of a general election, and seems to be suggesting that Labour would be willing to then embrace the third party of British politics. Balls has never been a fan of coalitions but he seems remarkably keen to woo Cable and the Lib Dems. “I think there are some things that are far too important to allow to be made secondary to a narrow personal or party interest. The jobs of young people and the future of our economy are things that require you to do the right thing and the idea that you would sort of turn away for sectional reasons from doing the right thing in a hung parliament would be absurd.”

NOT 'GIVING A TOSS' ABOUT BEING LABOUR LEADER

He may be willing to do a deal with the Lib Dems – but what of his own personal political ambitions? Some senior Labour figures, especially but not exclusively on the Blairite wing of the party, are convinced that Balls hasn’t given up on his dream of being Labour leader. He is, they whisper, always plotting. In our new updated biography of Ed Miliband, serialised in the Mail on Sunday, James Macintyre and I quote senior Labour figures claiming that "the Ed Balls machine is running the show" and that they "cannot believe that Ed Balls doesn’t want to be leader of the Labour Party."

How does he respond to such claims? “I think its really important when you get to the stage I’m at in my life to enjoy every day and to make sure you don’t ever look back and say I spent ten years agonising about what might happen.”

ed balls

So, he doesn’t rule out running for Labour leader again? He sighs. “I think its very unlikely and not motivational for me in the way that maybe it was 15 years ago, or maybe it is for others today. If I’m honest with you, we’re two and a half years from an election, our kids are 13, 11 and 8 and me and Yvette do not ever spend our time speculating what might happen if we lose the next election. It’s too bleak a conversation.”

He turns to two of his aides - Alex Belardinelli and Balshen Izzet – who are on the train with us. “Since the leadership election have you ever, ever, heard me raise with you or anyone else that I would ever be leader of the Labour Party?” he asks them. “Ever?” They silently shake their heads. “To be honest, you’ve got to get the balance right in life so I’m quite focused on trying to pass Grade 2 piano by the end of the year, quite focused on whether I can do a marathon next year, am very focused on the fact that our middle child has just started middle school…and I really, really want to win the election.”

He seems desperate to convince me that he is happy, content, unambitious. “If my political career ends today, this minute, I would look back on the last 20 years and I’d be happy with my obituary.” Of course, Balls adds, he would like to do much more: “If the pinnacle that I reach is to be chancellor in the next Labour government, that would be absolutely 100% for me. If I’m honest with you, personally, it doesn’t matter, I actually don’t care, it’s not something which I think about, worry about, care about, at all. Whether I’m leader or prime minister is not part of my mindset; it’s not part of my goals.” His voice is getting louder and louder. “If I say to you I rule it out, I don’t think you’d believe me. If I say to you it is very unlikely, I think that’s totally honest. I don’t care. I don’t give a toss. I really don’t give a toss.” His two aides titter. I can’t help but laugh myself at his deeply passionate (non-denial) denial. There’s then an awkward pause before he adds: “I really want to be chancellor.”

Balls seems to have taken his third-place finish in the 2010 leadership contest better than expected. He didn’t sulk or show any bitterness towards Ed Miliband and nowadays looks and behaves like a man who was born to be shadow chancellor. One of his staff tells me that on several school visits Balls has talked to a primary school class, found out they are holding school council elections and urged the pupils to stand. "You never lose from putting yourself forward and having a go," he has been heard to say to them. "I ran in the Labour leadership election and didn’t win – but it was the right thing to do."

Meanwhile, his former rival for the leadership, David Miliband, as our new book makes clear, has yet to recover from the defeat inflicted by brother Ed. Does Balls think the elder Miliband should give a “toss” about the Labour leadership? “If I was giving David some advice, I would say he probably shouldn’t give a toss.” He adds: “David is one of the talents of our generation, it is a real loss to the shadow cabinet that he’s not there [but] the reality is that he knows it would be really hard because people would find it very hard not to shift back to a prism of retrospection.” However, the shadow chancellor adds: “If he wanted to [come back], then I would do everything I could to back him and make it work.”

Would he give up the shadow chancellorship for the elder Miliband? After all, what other frontbench job would be big enough to give to the former foreign secretary and leadership runner-up? Balls has a mischievous grin on his face. “There’s a limit to even my generosity.”

Read part two of this extended Ed Balls interview tomorrow, on Balls the person. What B-word does Balls deny he is? How did he propose to wife Yvette? And how difficult is their work-life balance?