12:51 pm - February 22nd 2013
Late last year I was invited to Christmas drinks at Ed Balls in Westminster, along with other bloggers and lobby journalists. It wasn’t a swanky affair – held in his small office in Portcullis House – and Cameron had decided to hold his drinks on the same evening so it wasn’t a big throng either. I rarely get a chance to ask him questions so I decided to say hello just before Mr Balls left for the night. Roughly, this is how our brief conversation went.
I said: Hi Ed, Labour has been criticised by many, including myself, for not going far enough on financial reform as all we’ve done is signed up to the watered-down Vickers Report (same policy as the Conservatives). Don’t you think Labour should be doing more to break up and tackle banks that are ‘too big to fail’?
Ed B replied: Well, we are always going to have some banks that are too big to fail – you cannot avoid that. What we are doing is trying to ensure there is separation between casino banking and retail banking, and that banks have enough capital kept as collateral so they are more insulated from shocks.
This response agitated me. Neither of those conditions would prevent another financial collapse (Lehman Bros was entirely an investment bank) and this was exactly what the Conservatives said they were doing. We were copying them.
I replied: Ok, let me put it another way. We both agree we need more competition in the banking sector to ensure there isn’t an oligopoly of big banks that have most of the market. That would also reduce risk making it less likely that we have to bail out banks. So what are we doing to encourage more competition in the banking sector?
Ed Balls replied: Good question Sunny, good question. I have to go now but we’ll have to come back to that discussion.
And that was it.
I was gob-smacked. It wasn’t clear how Labour was proposing to be any different to the Conservatives on financial reform, and show how it had learnt from previous mistakes. If the banks collapsed again under a Labour government in 2018 we would have a credit crunch and a bail-out all over again.
I say this because the publication of Anthony Sheldon’s letter in the New Statesman – and responses by Mark Ferguson and Jonathan Freedland – have raised the question of whether Ed Balls should remain the Shadow Chancellor going into the 2015 election. I’m sure he will, but I don’t think he should.
To make my point a different way I want to ask a question of fellow Labour party members. Let’s say you meet a voter on the street and she asks: “what are Labour’s plans to create over a million meaningful jobs (not workfare ‘jobs’) and what has Labour learnt from the financial crash” – how would you respond? I suspect most of you would struggle to respond. I would struggle to respond. I bet even the Fabians and IPPR would struggle to respond.
That is because the Labour party has no clear answer yet. During the Labour leadership election Mr Balls gave a speech at Bloomberg that was widely applauded because it argued that austerity would hurt the economy as it would bleed a patient when it was ill. He was echoing what many of us on the Left had been saying – and we have all been proven right.
But the problem is that since then Mr Balls has become extremely timid and scared of being labelled a ‘deficit denier’. The entire shadow cabinet has been barred from talking about any policy that would require spending money. Mr Balls himself talks about the need to make cuts but never about the need to borrow cheap money from the financial markets and stimulate the economy – as any sensible economist would advocate now.
Similarly, there is no talk of major financial reform at all. We have some tinkering – which even the Conservatives are happy to support – and a National Investment Bank. He won’t even commit to the Robinhood Tax on financial speculation.
It’s understandable that Labourites don’t want a civil war going into 2015; the hunger to defeat the Conservatives is too strong. But what are we fighting for when we have little to say on the two biggest issues of our generation? Ed Balls is likely preparing to sign up to Conservative austerity plans past 2015. Are we going to convince voters we have changed and offer a clear alternative simply by offering to cut spending slightly differently?
Mr Balls does have a lot of critics within the Labour party. Lord Glasman warned of Ed Balls’ timidity over a year ago; many in the trade unions too haven’t forgotten his appeal to fiscal conservatives with a 1% public sector pay freeze pledge. They are silent because they want to ensure we don’t distract from the Coalition’s failures. But we need to have a debate about Ed Balls’ timidity now rather than six months before an election. We should be asking now about Labour’s big policies that match Ed Miliband’s speech last week.
We cannot carry on pretending Labour can create meaningful jobs, have a more responsible capitalism and cut inequality without serious financial reform. The case against Ed Balls isn’t that he is too tainted by the last administration, but that he remains a City-friendly technocrat who is unwilling to push the bold ideas the British economy needs.
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
· Other posts by Sunny Hundal
Story Filed Under: Blog ,Economy ,Labour party ,Westminster
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