Ed Balls wisely resisted the temptation to boast that he had been vindicated by today’s terrible growth figures. Instead, in an appearance on The World At One, he calmly offered himself as the voice of experience to an economic novice.
“I worked at the Treasury for ten years. My advice to George Osborne is: don’t think up excuses about the weather, don’t dig yourself into a hole,” he said. Quoting Keynes, he added: “If the facts change, I change my mind. George Osborne should do that.”
The shadow chancellor sensibly pointed to the fact that the deficit for 2009-2010 came in at £156.3bn (£21.7bn lower than the original Treasury forecast) as evidence that Labour’s policy of “going for growth” was beginning to fill the hole in the public finances. Osborne’s insistence that Labour doesn’t have a “credible deficit reduction plan” ignores that, without growth, neither does he.
Elsewhere, as the Spectator’s Peter Hoskin has noted, Balls refused to predict a double-dip recession. Asked if he thought one was likely, he replied: “I really hope not. I think the most likely outcome is months of stagnant growth, unless George Osborne digs himself out of this hole.” The risk of a double dip is real, as the NS economics editor David Blanchflower argued this morning, but this was an act of necessary caution from Balls.
Osborne’s decision to put so much emphasis on the weather in his response to the figures has already been widely ridiculed and was a clear misjudgement. As the Office for National Statistics pointed out in its briefing, if you strip out the effects of the snow, growth is still flat at 0 per cent. The Chancellor could only reply that “estimates are highly uncertain at the moment”.
When asked for a “plan B”, Osborne responded that he can hardly “cancel” the cuts, a caricature of his opponents’ position. But he could have easily cancelled the VAT rise, which, according to the Office for Budget Responsibility, will reduce GDP by 0.3 per cent alone. History may record that as his biggest misjudgement.
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