Analysis: Ed Balls’ deceptively conservative speech

The details of Ed Balls' superficially dramatic speech reveal modest proposals that hark back to Labour's past.

By Ian Dunt

With almost clinical precision, Ed Balls did what he needed to do. First, outline the failure of the government's economic policy. Second, drag Labour to a place where its arguments on the economy will be listened to. Last, outline the alternative. The sections offering apologies and 'five-point plans' sound grand, but pick into the nitty-gritty and you're left with an efficient but safe attempt to move the party on from its post-election rut.

Step one: Outlining coalition failure

Establishing the failure of the coalition's economic plan is not difficult. The international financial chaos is well understood. Osborne's reliance on private sector growth to balance out public sector losses has not come to pass. Keynes' 'paradox of thrift' – where countries damage themselves by all pursuing austerity at the same time and killing demand – was predicted by the shadow chancellor and currently represents a convincing assessment.

A passage criticising David Cameron's failure to take an international lead achieves the feat that dare not speak its name: praising Gordon Brown. "That is not just a failure of leadership – it is a complete abdication of responsibility too," Balls told delegates of Cameron's response to the international crisis. The comparison with Brown's (and therefore implicitly Balls') response to the financial crisis in 2008 is plain to see. It's worth noting that a speech whose pre-publicity centred on apologising for the past begins instead with coded praise.

Step two: Apologise

It's always difficult for the opposition to be heard, especially in the years after a general election defeat, but Labour has a more specific problem on the economy. A hugely effective media blitz by coalition ministers before and after the election convinced much of the public that Labour was directly to blame for the size of the deficit.

Balls has decided to establish some political space by leading headlines with his apology – while not quite making it. In fact, the most interesting element of the passage concerns what he would not apologise for. Balls' list of Labour regrets had mostly already been apologised for. For instance, Blair apologised for the 75p pension rise over a decade ago and Brown had already said he regretted trying to abolish the 10p tax rate.

When the shadow chancellor comes to bank regulations he stops short [of what?] – although he did do so earlier in the Commons and on radio this morning. He then draws a red line on spending on public services, saying: "Don't let anyone tell you that Labour in government was profligate with public money… and don't let anyone say it was public spending on public services here in Britain which caused the global financial crisis".

This red line tells us more than the area where Balls was prepared to give ground. Labour strategists correctly believe there is no animosity to spending on public services – just opposition to wasting money. Meanwhile, the party needs to preserve its record on improving health and education.

After feigning an apology, and therefore – according to commentators – 'earning the right to speak' on the economy, Balls cements the impression of a changed party by issuing a 'tough' message to Labour members about the deficit. The shadow chancellor repeated the 'halve in four years' formula established by Alistair Darling and insisted on the need for discipline in public sector pay. He also noted forcefully that Labour would not roll back all the spending cuts made under coalition.

Step three: The alternative

Once it comes to mapping out Labour's alternatives, Balls offers two rules to salvage Labour's reputation in voters' minds and a five-point economic plan.

One Labour rule – that the party will operate under fiscal rules monitored by the Office for Budget Responsibility – sounds interesting but there were no further details this lunchtime. The second – that the windfall from selling off bank shares must go towards paying off the deficit – is a shrewd political move foreshadowing the political battlefield of 2014. Osborne will be desperate to use the sell-off to fund pre-election giveaways. Pre-emptively attacking that giveaway while stressing the money should be going towards the deficit is a major step towards regaining economic credibility, while attempting to neuter Osborne's long-term political plans.

Balls' five-point plan contains some old ideas (cutting VAT and using a renewed bank bonus tax for affordable homes and youth employment) and some new ones, including bringing forward capital investment projects, one-year national insurance tax breaks for small firms employing workers and cutting VAT for home repairs to five per cent. Rather ingenuously, Balls suggests using a failed local business scheme of Osborne's to fund the national insurance proposal.

The best part of the ideas is the way they mimic coalition plans, and therefore give Balls the chance to paint any new announcement on these areas as a response to Labour pressure. Osborne is widely tipped to be preparing an announcement on national insurance, for instance, and the Lib Dems have been openly talking of capital infrastructure projects for the last month.

Wrapping up

For a speech hyped as a break with the past, it’s clear that Balls' assessment of the past has changed little since he was in power. His apology for Labour's record dissipates upon close investigation and his suggestions for the future play on well-established political and economic lines. But the tactical manoeuvring being undertaken has real potential. The shadow chancellor's speech established the PR line on Labour's apology and then offered relatively specific alternative economic and political remedies. It’s a small step – but one in the right direction.