ED Balls yesterday unveiled an £18bn plan to stimulate the economy, including slashing VAT on home improvements to five per cent and giving small firms a national insurance holiday if they take on new workers.
Balls repeated calls for the government to reintroduce Labour’s bonus tax; to lower the headline rate of VAT from 20 per cent to 17.5 per cent; and to bring forward capital projects such as building schools and roads.
He said: “The government must adopt a steadier, more balanced plan to get our deficit down and take immediate action now to support the economy and create jobs here in Britain.”
Balls’ measures would cost the exchequer around £21bn while his bonus tax would raise between £2bn and £3bn, bringing the net cost of his five point package to around £18bn.
Justine Greening, economic secretary to the Treasury, said: “This speech failed the credibility test. Everyone can now see that Ed Balls is dangerously addicted to debt.”
The director general of employers’ organisation the CBI, John Cridland, said some of the proposals for stimulating growth were “worth considering” but that the headline VAT cut – which would cost the exchequer £12.1bn in 2011-12 – was “not affordable”.
Balls used his first conference speech as shadow chancellor to sound a more measured note on the deficit, responding to fears that Labour has lost its credibility on the economy by failing to acknowledge the parlous state of the public finances.
He promised to introduce “tough fiscal rules” that Labour would need to adhere to should it win the next election, although he failed to set them out, merely saying they would put the “national debt on a downward path”.
BEHIND THE LINES | BALLS SPEECH
“It’s not right to blame David Cameron and George Osborne for everything that’s wrong with our economy. They didn’t cause the global financial crisis.
That crisis was a body blow to our economy and our public finances.”
Talk about damning someone with faint praise. Balls pretends he is cutting the Prime Minister and chancellor some slack by saying they aren’t entirely to blame for Britain’s economic woes. Of course, very few people blame the Tories for the state of the British economy let alone the 2008 financial crisis – they were in opposition.
“Don't let anyone tell you that Labour in government was profligate with public money when we went into the crisis with lower national debt than we inherited in 1997 and lower than America, France, Germany and Japan.”
Classic Balls. The 2008 public debt was only lower as a share of GDP compared to 1997. And while Britain’s debt was lower than these countries, he has picked nations with uniquely high debt piles amassed well before the crisis. The UK’s deficit as a share of GDP in 2008 was higher than all these countries with the exception of the US.
“When they say we made mistakes in government, they're right... we must admit them and show we've learned from them. The 75p pension rise – that was a mistake. So was abolishing the 10p tax rate. We didn't spend every pound of public money well.”’
Balls identifies a handful of mistakes made by Labour when in government. But the first two are things that actually generated revenue for the exchequer. On the principal charge – that Labour was profligate – he offers no examples of overspending, merely observing the government didn’t spend every pound well.