Ed Balls is back with a cunning plan to save the economy by cutting the deficit.
He is proposing "demanding and independently scrutinised fiscal rules for cutting the deficit".
This is from the man who, as Gordon Browns special adviser, set out five tests for the UK joining the Euro. This is still Labour policy as far as we know; only yesterday Ed Miliband refused to rule out joining the Euro on the Andrew Marr show, he just postponed it for a parliament or two.
This is from the man who, as Gordon Browns special adviser, created the famous golden fiscal rules for the economy.
Obviously, the flaw in the plan is that rules are meant to be broken, especially if you are a Labour chancellor and they are economic rules.
Lets remind ourselves of Ed Balls last set of economic golden rules:
The core of the 'golden rule' framework is that, as a general rule, policy should be designed to maintain a stable allocation of public sector resources over the course of the business cycle. Stability is defined in terms of the following ratios:
1.The ratio of public sector net worth to national income
2.The ratio of public current expenditure to national income
3.The ratio of public sector income to national income.
Labour publicly set aside their own rules when they allowed the country to enter recession, but they had already broken the rules by allowing spending to get out of control and were running a deficit in the good years before the recession even started.
The other rule that was supposed to save us from running up debt was the sustainable investment rule which said that government debt should not go above 40% of GDP, but they had already broken that rule by the end of 2008. By 2010 it had almost doubled the target at 76.7% of GDP and is still rising. Oops.
Labour even wrote the rules into law in the 1998 Finance Bill.
According to the 'Code for Fiscal Stability' submitted to parliament in November 1998, central to the fiscal framework are five principles of fiscal management:
transparency in the setting of fiscal policy objectives, the implementation of fiscal policy and the publication of the public accounts;
stability in the fiscal policy-making process and in the way fiscal policy impacts on the economy;
responsibility in the management of the public finances;
fairness, including between generations; and
efficiency in the design and implementation of fiscal policy and in managing both sides of the public sector balance sheet.
Labour broke their own principles of fiscal management. Lets compare their rule with what they did in government:
transparency: pretended that current spending was investment; fudged the growth numbers behind closed doors (see Alistair Darling's book); planned a VAT rise but opposed it when in opposition
stability: created the 10p tax rate, then took it away, then borrowed money to pay off the poor people who lost out; allowed the worst recession in sixty years; created a 'temporary' 50% tax rate but now want to keep it.
responsibility: allowed the banks to gamble with our economy by creating the non-regulating bank regulator the FSA; allowed the budget deficit to grow to >12% of GDP; created an independent Bank of England with a target of 2% inflation but poured hundreds of billions into the economy by printing money, stoking up inflation and consistently breaking the target
fairness: stole from future pensions to pay for higher pensions for current pensioners; stole from future generations in the form of massive public debt; allowed disgraced bankers to keep their pensions and bonuses despite blaming them for the crash
efficiency: wasted billions on failed IT programs and ordered 38 billion pounds worth of military hardware without a way to pay for it (these are just two examples, there are MANY more)
If Ed Balls thinks that "demanding and independently scrutinised fiscal rules" will save us from a tax and spend (or borrow and spend) Labour government then maybe we can take him at his word and apply the rules that he had Gordon Brown put in the 1998 Finance Bill and send the people guilty of breaking the old rules in jail.
The problem for Ed Balls is that he just is not credible on the economy. Last year he told us that the Darling plan to cut the deficit was too fast. Today he tells us that the Darling plan is still Labours policy. He tells us that Labour will half the deficit in four years, but then opposes every cut proposed by the government. Now Balls tells us that he is serious about deficit reduction and will write the deficit cuts into rules, yet at the same time Labour are promising a multi-billion pound VAT cut and to spend more on university fees.
The problem for Ed Miliband is that he is too weak to move away from the Labour economic legacy. He tried to have a fresh start by appointing Alan Johnson, but that failed and he was forced to appoint the architect of Gordon Brown's economic policy.
Well, if you hire the same architect you get the same policies, and we all know that they were the completely wrong policies for our country. They were wrong in the last decade. They are wrong for this decade. They are wrong for any decade.
Labour will not be taken seriously on the economy until Ed Balls has gone, and Ed Balls will not go until Ed Miliband has gone.
Labour need a new leader, and fast (but NOT Mr or Mrs Balls).