Though others are viewing the demotion of Angela Eagle from Shadow Chief Secretary as a move by Ed Miliband to clip the wings of Ed Balls, it does mean Miliband has sacked from his Treasury team one of the Labour MPs with the most dramatically wrong track-records when it comes to economic predictions.
Keeping her well away from future economic policy it would seem is no bad move at all on Ed Miliband’s part.
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12 Comments
It seems that Ed Balls criticisms of Osborne’s economics and his prediction of their effects on the UK economy are coming true.
Perhaps it would be better if you focused your criticism on current economic policy, rather than what some minor opposition politician said a few years ago.
Indeed. Presumably, by the same logic, you will be leading calls for George Osborne to be sacked.
George Osborne at least changed his views in line with the evidence.
Ms Eagle what a name is her father Eddie the Eagle, but to be honest lets just say it could not happen to a nicer person…..
Osborne changed his plans in line with being elected, the same as the lib dems. The evidence one week after the election was no different to what it was the week before.
“Presumably, by the same logic, you will be leading calls for George Osborne to be sacked.” – no, that doesn’t follow. Mark’s commending the sacking of Angela Eagle, I don’t recall him “leading calls” for her to be sacked. If he laments the sacking of Gideon when it happens (oh, if only!) then he can be accused of inconsistency.
As a matter of interest, was Osborne still wearing the rose-coloured glasses as late as April 2008? (Genuine question – I can’t remember when the Tories caught up with Vince the Raven, though I know it was late…)
Even better would be to remove Ed Balls from the Cabinet. I would be much rather Alan Johnson had learnt from shadowing Osborne than let Ed Balls anywhere near the public purse.
Indeed. Teaching someone some basic economics and the current rates of VAT and National Insurance should be done in a couple of weeks, but changing a whole ideology… good luck with that one.
Malcolm Todd writes: “As a matter of interest, was Osborne still wearing the rose-coloured glasses as late as April 2008?”
As I recall, in 2008 the Conservatives were still promising to match Labour’s spending levels – which makes all Osborne’s talk of Labour “maxing out the credit card” during their term in office a bit hard to swallow.
Angela Eagle joins those other members of “Team Balls” in getting moved from the shadow treasury team. All those (with the sole exception of Chris Leslie) who gave support to Ed B in the leadership bid have now gone – “Team Balls” has been severley weakened as a result. Their replacements are all Miliband leadership backers, Rachel Reeves,Owen Smith and Cathy Jamieson. A very smart move by the leader to ensure Balls doesn’t build his own empire with devoted foot soldiers to toe his line and not the Party’s.
Malcolm Todd said: “As a matter of interest, was Osborne still wearing the rose-coloured glasses as late as April 2008? (Genuine question – I can’t remember when the Tories caught up with Vince the Raven, though I know it was late…)”
And John said: “As I recall, in 2008 the Conservatives were still promising to match Labour’s spending levels – which makes all Osborne’s talk of Labour “maxing out the credit card” during their term in office a bit hard to swallow.”
Hang on a minute guys, stones and glass houses…
The Lib Dems backed Labour’s spending ‘envelope’ (ie aggregate total) all the way through the boom years and up to the 2010 general election. *
It’s true that in some (but not all) of his statements Vince Cable did suggest that there would have to be a bigger fiscal adjustment from 2010-11 onwards than that outlined in Alistair Darling’s plans – for example, in his pamphlet for the Reform think-tank in September 2009 he argued for a tightening almost exactly equal to the one the coalition is now pursuing (although during the general election campaign itself we, like the other parties, didn’t make reference to this and ducked serious discussion of the scale of the challenge, leading to an assumption rubber-stamped by the IFS that we endorsed the Darling plan).
But all the way through the years of plenty we backed Brown’s pro-cyclical (or, to put it another way, anti-Keynesian) spending spree, which ramped up government spending faster than even the buoyant tax revenue could keep up with from 2000 onwards.
The consequence of that was that a healthy budget surplus of almost 2% of GDP swung into deficit by 2001-02 and the government carried on borrowing all the way through the long boom that preceded the crisis. (The extent of the ‘structural’ or underlying deficit was itself masked by the unsustainable revenue streams, and was much higher than the official 2-3% of GDP that the Treasury assumed through most of this period.)
Fiscal profligacy didn’t cause the crisis – but it did mean the public finances were in poor shape to withstand the recession; minimised the scope for effective fiscal stimulus; and ensured that the squeeze over the coming years would have to be significantly greater.
Our acquiescence in this was a major intellectual and policy error, which seriously undermines our claims to prescience.
If Vince the prophet foretold the crisis of a bubble economy collapsing, as we always maintain, then why did he assume that the bubble tax revenues which that economy (in particular the housing and financial sectors) created were a sustainable basis for our spending plans?
The logic of our position would surely have been to say ‘the economy is overheating, therefore Labour’s spending plans need to be scaled back’ – both from a macroeconomic policy point of view (since tightening fiscal policy would have cooled the boom, at least to some extent) and to ensure the public finances remained on a sustainable path over the medium term.
But far from doing that, we accepted Labour’s totals at each of their spending reviews and welcomed the spending bonanza – even as we warned that serious imbalances were building up in the economy and that the continuing boom was built on foundations of sand.
You could say that means we were half-right and half-wrong; or, less charitably, that we were especially culpable given that we recognised the flimsy economic basis for the ramp-up in spending but recommended no action to curb it.
The Tories either didn’t spot that the boom itself was unsustainable (although in budget debates the likes of Ken Clarke and Peter Lilley repeatedly drew attention to the housing market and personal debt problems Vince also identified) – or, having had their fingers burned in the past when Oliver Letwin suggested lower spending than Labour, cowered before the Brown spin machine and went along with his spending spree against their better judgment.
The result was a baleful fiscal policy “me-too-ism” in which all the major parties bought into Brown’s high-spending, borrow-in-the-good-times model and allowed him to set the terms of debate.
Why this should have been the case is an interesting question: I guess the reasons include Brown’s undeserved reputation as a great Chancellor; fear of New Labour’s bully-boy media manipulation that polluted the public discourse and shut down debate; and, in our case, I fear, an ingrained belief that ever higher public spending was a Good Thing and thus could not be opposed either on fiscal or on broader intellectual grounds.
This is all history now; but it does illustrate why gloating about our prescience is misplaced. There has been more than enough of that already.
The important thing is to learn lessons from the collective failures of the political class during this disastrous period of economic mismanagement, on everything from central bank inflation targeting to banking regulation to fiscal policy to the way in which our tax and planning systems distort the resource-allocation process and contribute to undesirable economic imbalances.
Perhaps most importantly, we need a public discourse in which the prevailing orthodoxies (yes, including ones I support like fiscal conservatism) can be challenged without those doing so being demonised or shouted down.
On that basis, I would defend Ed Miliband’s decision to tackle the reform of capitalism in his conference speech even though I think his good/bad companies dichotomy is a nonsense in practical policy terms. The idea was half-baked, and smacked of posturing; but the decision to challenge the consensus and address wider concerns about the way the economy works is not wrong-headed.
Likewise those who challenge the efficacy of the (broadly similar) climate change policies advocated by all the major parties, or want an in/out referendum on EU membership, should be extended the same courtesy. To me, at least, liberalism is as much about a spirit, a willingness to defend and engage in rational argument, as it is about any particular set of beliefs.
* Re my earlier point: (There was a brief period when this wasn’t true, shortly after Nick Clegg became party leader, in which we called for a small overall reduction in spending relative to Labour’s plans – ie a lower rate of increase – in order to fund a small net tax cut. This at least started to challenge Brown’s big-state model, but it did nothing to address the deficit and was dropped soon afterwards when the party leadership concluded there was no scope for net tax cuts given the ruinous public finances.)
It’s not the level of spending of the last government that was the problem – it was running a deficit. Nothing wrong with the state spending money whether the economy is booming or busting. (Obviously, that’s a matter of opinion; for some people, state spending is inherently bad – but that’s a different argument.) The problem was wanting the political gains of spending on lots of lovely, voter-friendly things without confronting the problem of paying for it, which would have meant media-unfriendly taxes.
However, Alex is right that our party was at best marginally less dishonest than Labour and the Tories in their approach, both during the unsustainable boom years and during the election campaign. Except that Labour, being in government, were the ones with the actual power to do something different: which creates a greater obligation to do the difficult thing.