Shadow chancellor claims Mervyn King doesn’t agree with austerity measures

JUST weeks into the job, and Labour’s new shadow chancellor is beginning to shape the argument on the economy far more than his predecessor Alan Johnson ever did. But Ed Balls’ key arguments are disingenuous at best. Here City A.M. picks them apart.

1. High levels of public spending did not cause the financial crisis.
“Do I think that... too much spending caused the crisis? Absolutely not.”

A classic straw man argument. No-one says that overspending by Labour caused the crisis. But the IFS and OECD say the UK entered the crisis with one of the biggest structural deficits in the world, meaning it hit the country far harder.

2. I agree with Mervyn
I think [Mervyn King’s] been quite right not to raise interest rates. But it’s very important that he resists pressure – and we’ve had it from the Conservative party – to raise interest rates.

Balls knows that the Bank of England will likely have to raise interest rates this year: this kind of statement suggests Labour will try to pin the blame on the Tories.

3. Mervyn agrees with me
I don’t think that Mervyn King in his heart of hearts really believes that crushing the economy in this way is the right way to get the economy moving.

Simply untrue. King has gone to great lengths to back the government’s austerity measures, occasionally to the consternation of his colleagues. If King were to repeat his support, Balls would say he was only trying to reassure markets.