AFTER his speech yesterday, I’m inclined to label Ed Balls’s economic policy “the ‘Wizard of Oz’ approach”. In the film, the lost farm-girl Dorothy is urged to go to the Emerald City to seek the Wizard who could help her get home. The Wizard is supposed to have mysterious magical powers, evidenced by all those “wonderful things he does”! He was her last hope of getting back to Kansas.
Dorothy reaches the Emerald City, but on arrival is frustrated by the gatekeeper obstructing her progress. “The Wizard?” the gatekeeper says, “But nobody can see the Great Oz... Even I’ve never seen him!”
Interviewers of Labour’s MPs will understand this obstructionism. Over the past three years, journalists have pressed Labour’s shadow cabinet to reveal clear plans on its approach to closing the UK’s huge budget deficit. Labour generalises that its alternative plan would be much fairer than the coalition’s, while still protecting services, but it never articulates clear areas for public spending restraint. Pushed on specifics, spokespeople use the equivalent rhetoric of the gatekeeper’s “come back tomorrow” – wait until closer to the election. Like the Wizard, their plan is well hidden.
Yesterday was billed as its revealing. In a speech for Reuters, shadow chancellor Ed Balls began to sketch out areas where Labour would question government spending. There was talk of efficiency savings, “effective” procurement, “joined-up” government, and “best use” of IT. Yet these are the sorts of things every government should always look to achieve, and which every opposition offers up as pain-free palliatives to dealing with excessive spending. Where were the specifics that would show Labour’s commitment to an “iron discipline” on public spending?
There was one proposal. All the ballast and media attention came with the announcement Labour might means-test pensioners’ winter fuel allowance, removing it from higher rate taxpayers. But closer inspection revealed this would save just £105m, with 5 per cent of pensioners affected. The saving represents 0.01 per cent of the £720bn in government spending this year, or 0.09 per cent of our £120bn annual deficit. To ascribe this measure status as meaningful spending restraint is to insult the intelligence of the electorate.
Like Labour’s plan for the reintroduction of the 10p tax rate, the key policy revelation yesterday was more a political statement than anything of economic significance. Largely inconsequential announcements on spending and tax are seemingly being emphasised by the Opposition to mask the lack of a realistic strategy on deficit reduction and curbing social security spending.
The smoke, mirrors and powerful rhetoric of the purported Wizard in our story were, of course, eventually exposed – it was all a fake orchestrated by a man behind a curtain. Without giving the public realistic specifics, the opposition’s plan will be open to the same charge. Worse for the party, if there is no meaningful plan forthcoming, many might “pay no attention to the man behind the curtain” at all.
Ryan Bourne is head of economic research at the Centre for Policy Studies.