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Labour and the slump: Getting the Balls rolling

The shadow chancellor was, if anything, cocky, reminding the world that he had warned how hasty cuts would lead to bust

For Labour baiters, this week’s theme is the rise of the backroom boys – the former advisers who lived in the shadows of Blair and Brown, and who are now emerging into the limelight, looking rather startled. Ed Balls did his bit to dispel this caricature on Monday, by delivering a vigorous speech which at moments drew rapturous applause from the Liverpool hall. The nagging doubt is whether the echoes of Mr Ball’s tub-thumping will resonate with the electorate beyond; for his mentor Gordon Brown failed to translate conference adulation into public affection.

In front of an off-white stage-set, Mr Balls could have declared Labour economics a blank sheet. With the party struggling in the financial blame game, the advance billing was that we were in for a show of humility. In the event, despite brief apologies for the 10p tax saga and anaemic bank regulation, there was precious little contrition. The shadow chancellor was, if anything, cocky, reminding the world that he had warned how hasty cuts would lead to bust. With faux magnanimity, he even declared it “not right to blame David Cameron and George Osborne for everything that’s gone wrong”.

Another expectation went only half-fulfilled – an acceptance of austerity. Conservative commentators, and indeed Tony Blair, suggest Labour’s rot was caused by excessive spending. The shadow chancellor insisted that the deficit is about bust banks not lavish public services. In the hall some delegates called for an “alternative economic strategy”, a phrase which has often been a byword for evading tough choices in Labour history. But Mr Balls contrasted the hard-headed management of Labour councils today with indulgence of the militant years – the “scuttling taxis” bearing redundancy notices, which Neil Kinnock once denounced, belong to a different age.

Mr Balls was hazy on specifics. He warned against easy promises to reverse Tory cuts, but then scored easy points by railing against the rise in women’s pension age, the sort of move any government would have to make in the longterm. The longterm, however, is distant indeed for families muddling through a frightening present. Mr Balls at least grasps the urgency of now. Like Vince Cable at the Lib Dems last week, he set out Keynes’s paradox of thrift, in which a shared scramble to save ends up bankrupting everyone. Unlike Mr Cable, he did not shy away from the obvious conclusion – that the current shock therapy will make matters worse.

The Balls diagnosis is hard to resist, but – beyond slower cuts – it is not coupled to a comprehensive cure. The demand for a VAT cut smacks of a lack of strategy. In government in 2008, it might have been justifiable as a quick and practical way to get cash flowing. In opposition, it should be possible to devise something more than subsidising shopping on largely imported goods.

That something should have been industrial and infrastructure investment. Both Mr Balls and shadow business secretary, John Denham, who also spoke in Liverpool, talked of fostering companies interested in more than quick bucks, but neither said how. There was nothing on company law, and the important proposal of a state investment bank will merely be “looked at”. Even this promise to consider the options is compromised, by the Balls pledge to flog the nationalised banks, as opposed to deploying them to boost the economy, which has been advocated by Adam Posen of the monetary policy committee. It is remarkable that the frontiers of radical thinking are more advanced in the Bank of England than the Labour party. That is testament to the marketopian spell that has been cast over politics for a generation. But at least Balls understands the ruin this spell has wrought, even as he struggles to shake it off. That alone stands him in good stead with his party, and might just earn him a hearing with the public beyond. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds