“2011 is a critical year for Britain’s economy and public services, and the coming weeks and months will tell us whether David Cameron and George Osborne’s reckless gamble has worked [writes Ed Balls in his blog]. With no plan for jobs and growth, they have instead staked the whole future of the economy on one card – the fastest, deepest deficit reduction plan in Britain’s peacetime history.
They inherited an economy which was beginning to recover strongly, with unemployment falling, interest rates at historic lows, and the public finances better than the Treasury’s forecasts. Britain had weathered the first economic storm and was on track for jobs, growth and – with tough choices on spending, tax and supporting growth – we were on a credible and sustainable path to deficit reduction.
The Tory-led government has deliberately and needlessly taken Britain down a different path with cuts that go too far and too fast, and tax rises which directly hit family budgets. They have cut jobs programmes, withdrawn government investment from the economy, raised VAT, and cut government support to millions of families. And in the autumn – before the impact of these measures had even begun – George Osborne and David Cameron boasted that their gamble had already succeeded and that strong growth was secure.
Instead, we are now starting to see the real consequences of their decisions: unemployment now rising, economic growth forecast to slow, mortgage lending at a 20 year low, and tax revenues falling. Over the coming months, as the impact of the VAT rise, deep spending cuts and rising inflation starts to hit home, we will be able to gauge the true impact of the Tory economic plan, and see whether their gamble has worked. If they are proved wrong and growth is slow this year, it is millions of ordinary workers, families and homeowners who will pay the price.
Labour’s alternative plan would put jobs and growth first. Instead of doing backroom deals with the banks on the disclosure of their pay, we would apply the bank bonus tax again. It brought in £3.5 billion last year which could be used this year to help create the jobs and growth we need.
The lesson of history is that good economics is good politics. But when Chancellors put political ideology or expediency before economic logic, the country pays a heavy price. This Tory Chancellor and this Tory-led government are repeating the mistakes of the 1930s and 1980s, but they just keep ploughing on. They had a choice about which path to go down, and it is already becoming clear they have made the wrong choice.
It is not too late to change course. It is not too late for an alternative. And if they do not provide it to the British people, Ed Miliband and I will. Of course we do not oppose every cut, but the Tory-led government is cutting too far too fast. And over the coming weeks and months, we will hold them to account for the reckless gamble they have taken, and the historic mistake they have made.”
Ed Balls took over the shadow chancellor’s role from Alan Johnson on Thursday