Shadow Chancellor Ed Balls tells Political Editor Jonathan Walker that Labour is in no position to promise a reverse to current spending cuts.
Labour’s shadow chancellor Ed Balls has backed a scheme piloted in Birmingham to divert billions of pounds away from Whitehall and into regions.
But he warned that councils reeling from public spending cuts should not assume a Labour government will bail them out.
Labour is making no spending commitments because it cannot predict what the economy or the nation’s finances will look like when the next election takes place, he said.
But Mr Balls struck a pessimistic note when he spoke to the Birmingham Post, arguing that the situation was likely to be worse in 2015, when a general election is expected, than it was in 2010, when the Conservative and Liberal Democrat coalition took power.
The Shadow Chancellor backed Lord Heseltine’s plans to divert billions of pounds away from Whitehall to be spent by local councils and economic agencies.
Birmingham and neighbouring authorities, including Solihull, East Staffordshire, Lichfield, Tamworth, Bromsgrove, Cannock Chase, Redditch and Wyre Forest, are conducting a three-month study to see how Lord Heseltine’s ideas can be put into effect in the region, working closely with the Tory peer himself.
But Mr Balls warned that some local enterprise partnerships – the economic agencies which Lord Heseltine hopes to place in charge of economic development – were not fit for purpose.
He also condemned the decision to scrap Advantage West Midlands, the economic agency set up by Labour which was abolished by the current government.
Birmingham City Council has set out plans to lose up to 1,000 jobs as it attempts to save £102 million over two years – and the authority last week announced plans to cut funding for children’s centres by £1 million and save £2 million from waste collection changes.
But council leader Sir Albert Bore has warned there will be a funding gap of £615 million by 2017, suggesting many more cuts will be needed. This is two years before the next election is expected. So if Labour does take power, and Mr Balls becomes Chancellor, would he be in a position to help the city avoid making cuts?
He said: “We have told Labour local authorities and spending departments that we can’t make any promises now to reverse any of the cuts coming in, in advance of our manifesto. And that’s actually quite difficult for people. But it wouldn’t be responsible for us to do so.”
George Osborne, the Chancellor, could not predict how much money the Government would have to spend in the 2016-17 financial year, so it was unreasonable to expect the Opposition to know, he said.
But Mr Balls also pointed out that despite making cuts in spending, it appeared that the Government was failing to meet its targets for cutting the deficit.
“Another two years or low growth and disappointing tax revenues makes that fiscal inheritance even worse, but it’s already pretty bad.”
I put it to Mr Balls that while he had made it clear he could not make any promises about raising or cutting spending, he sounded pessimistic about the prospects for the economy – and therefore for the chances of reversing any of the spending cuts.
"We can’t make any promises now to reverse any of the cuts coming in, in advance of our manifesto."Ed Balls
He said: “I was worried about the inheritance we would face a year ago. And things are a lot worse now than a year ago. And my worry is, if we carry on like this for another year, the inheritance is getting worse and worse.”
Birmingham is at the forefront of attempts to improve that inheritance by promoting economic growth, as a pilot area for ideas set out by Lord Heseltine, the former Deputy Prime Minister, in a report published last October called No Stone Unturned.
This called for vast sums of money to be taken out of central government and allocated to local enterprise partnerships instead, as well as for chambers of commerce to play a much bigger role in providing support for business.
Although the report was commissioned by the Government, it actually had more support on the Labour benches than among Conservative ministers, Mr Balls claimed.
He said: “I think there is a lot that we can support in his report. He fundamentally says you can’t have a successful and balanced growth and employment unless you have a vibrant and strong private sector to deliver that growth, jobs and investment.
“But if you think the way to get that strong vibrant private sector is for government to simply cut its spending, to walk away from decision making and to leave it to the market, well that is doomed and foolish.
“I have never met a CBI or Chamber of Commerce representative who doesn’t say there are certain regulations they would like to reduce, certain spending they think is inefficient, but who would also say that government’s got to make the planning system work better. You’ve got to spend more on transport and education. We have to find a way in which we can have an industrial policy where we work together to build upon the things we are really good at.
“And that sense of a partnership between local government or a regional or sub-regional view, and national government, that is at the heart of the Heseltine vision, and that was actually at the heart what we tried to do in regional or sub regional policy while we were in government.”
As Mr Balls sees it, the Heseltine proposals are partly about reversing one of the major mistakes this government has made – the abolition of the regional development agencies (RDAs), which included Advantage West Midlands based in Birmingham.
These were government agencies controlled by the Department for Business, Innovation and Skills but based in the regions they served, and they worked closely with local businesses and councils. The difficulty, in the Shadow Chancellor’s opinion, is that their replacement, the Local Enterprise Partnerships, are not all up to the job.
People think I'm the ChancellorEd Balls
He said: “I think the story of the last few years is that the Treasury bounced business and [Business Secretary] Vince Cable into thinking that abolishing the RDAs was a good idea. And over the last two years Vince Cable has come to see what a deeply foolish and destructive thing that was. And that’s essentials what Heseltine says. The problem we’ve got is what has been put in its place, the local enterprise partnerships, are not at the moment really fit for purpose.
“They are too fragmented, there’s much too much variation in their quality, and most importantly they don’t really have clout.
“And Heseltine says you’ve got to give that local private public partnership voice clout.
“And that’s something we totally agree with. He doesn’t fully answer that question the report. But that’s because I don’t think George Osborne agrees. But we do.”
Industry was crying out for partnership with Government, said Mr Balls. He highlighted a visit to the MG Rover plant in Longbridge, Birmingham, where managers told him Advantage West Midlands had helped secure investment from the plant’s Chinese owners, Shanghai Automotive.
“When I went to Longbridge, and I went the day before the new MG line was opening formally with the Chinese premiere coming over, and talking to the management there, they said Advantage West Midlands played a really important role in brokering this deal to bring car production back to Longbridge by knocking heads together with local government and national government, working with the supply chain.
“They said to me, the thing that they didn’t really understand is that the government subsequently has abolished them and put nothing in their place, and who would do that again?”
Being Gordon’s right hand man isn’t my problem
Some Conservatives and Liberal Democrats argue that Ed Balls is a liability to his party, because he reminds voters of Gordon Brown’s Government.
But Mr Balls spoke out against those who suggest that because of this he lacks credibility.
“That is what the Tories are desperate to achieve but I don’t think they are going to succeed in that.
“The problem I actually have, when we have done our testing on these things, is more people think I’m the Chancellor than George Osborne. Because they see me a bit more on TV. He’s such a submarine.
“Because they see me more often, they think I’m the Chancellor. I’m really worried they might think I might embody flatlining. My biggest risk is that they’ll think I’m the person taking the economy back into double dip recession.
“The reality is the Tories want to fight the election about the past, because they are very worried now about the present, the future.
“That wasn’t the original plan. The reason they are ramping up the decibels to get to Ed [Miliband] and me in the last six months is because the economy has gone back into double dip recession.”
So will he be the Chancellor in a Labour Government after the next election?
“That is absolutely a question for the leader of the Labour Party, not for me.
“And as he said, for us to get into speculation about what we would do once we have one an election smacks of an arrogance and complacency we are not going to get into.
“But we are working really closely together.”