The New Dark Age

22 March 2011 — New Left Project

In exclusive interviews for New Left Project, Jennifer O’Mahony spoke to Labour’s Shadow Chancellor, Ed Balls, and Shadow Secretary of State for Business, Innovation and Skills John Denham, at a video game workshop in Liverpool city centre. Denham and Balls were on a group visit with other members of the shadow cabinet, to promote business and industry in provincial cities like Liverpool.

Readers may of course take it as read that NLP is not granting space to Balls and Denham because we share their politics. The value of the piece is that, whether or not we agree with the Labour leadership on a given issue, the parties’ policies will always be a matter of direct concern to the left. Labour’s positions on financial regulation, tax avoidance, EMA, AimHigher, apprenticeships, universal benefit and the cuts in general are all of interest to our readership, since they matter to and directly affect the lives of working people in this country.

On the assumption that readers will share our misgivings about many of Balls’ and Denham’s responses, and regarding the direction of the Labour Party more generally, we invite you to make full use of the comments facility below the line, and take this opportunity to engage in a discussion on the issues raised in this interview, and the emerging policies of the Labour Party under Ed Miliband.

– David Wearing, co-editor

Ed Balls

Jennifer O’Mahony – Do you think the financial crisis, when it happened in 2008, was a missed opportunity to regulate the banks in a more stringent way so that we wouldn’t have to be making these decisions right now?

Ed Balls – No, to be honest. Everybody around the world, whatever their regulatory structure and the political colour of their government, missed this financial crisis. [We] missed seeing it building, missed the need for more effective regulation. There was a failure of Britain and America and Japan and Germany. At the point where it happened it was potentially of such hugely disastrous proportions, that we’d seen a whole series of banks going bankrupt, that at that time the immediate thing to do was to keep the economy afloat and keep the banks afloat to stop us slipping into depression. That had to be the first priority.

And it’s very easy to look back and say ‘why, two years ago, didn’t we do this on regulation or this on pay’, but the truth was, this was about, in real time, stopping a crisis developing that we’d never seen the like of before. I think if we hadn’t made that the priority in keeping the economy growing, we’d have ended up with a deeper recession and bigger deficits. So in some ways focussing on stopping the economy grinding to total halt and entering into a depression was the right thing to do for the deficit’s point of view as well. The right thing to do is to get it down in a careful and balanced way, while you keep people in work and while you hold on to these services which are so vital for the future, and if you try and go too fast with deficit reduction, the danger is you make your deficit reduction job harder, as well as undermining lots of things that matter for the economy and to the future of our country.

JO – Say that’s the case, do you not think that tackling things like tax avoidance in a more aggressive way, and Labour is very reluctant to get onside with groups like UK Uncut, would that not be a way of…

EB – David Hanson, who’s on my team, wrote an article yesterday on LabourList exactly about how we need to put the heat up on tax avoidance. There is a legitimate role for protest, or trade unions, or the voluntary sector, for newspapers… there’s also a proper role for opposition politicians. The thing about tax avoidance is that it’s a continual struggle. It’s a continual fight, because there are many very highly paid individuals who are very skilled at trying to find their way around the legislation to avoid tax; it’s what companies do. Your Inland Revenue, the HMRC, have to be as good at spotting those problems and closing things down and changing the law, and that is a continual struggle. When we were in government we spent ten years fighting tax avoidance, and often plugging loopholes and stopping things, and getting money in. But if you ease off on the pressure, and in particular, which is what David’s piece is about, you lay off a lot of staff at HMRC it’s a charter for tax avoiders. Obviously, laying off HMRC staff, if that leads to more tax avoidance, makes it much worse.

JO – When Alan Johnson was asked about this, he basically giggled. I just wonder if that’s symptomatic of Labour’s mixed message, sometimes saying there’s nothing we can do and sometimes coming up with some solutions. Do you feel Labour has lacked a coherent strategy on this, especially before Ed Miliband was elected?

EB – I think we came out of government because we lost the election after thirteen years. That means during the first period the new government, the Conservatives and the Liberals, have the run of the place. And we have to stand back and understand what’s happened and come to terms with that. Therefore it’s natural that it felt to some people like the Coalition had a bit of a free rein last year; they were the ones that got into power. Second, if you’ve come out of government, you know it’s more complicated than it seems in opposition. Therefore if you take, for example, issues around tax avoidance, we live in a global economy, companies are very mobile. In government you have to strike a balance between being too soft and losing resources, being too heavy handed and seeing jobs go abroad. Naturally for an opposition party that’s just come out of government we’re alive to that.

Two things are changing. First of all, the coalition have been in long enough now to make a lot of mistakes, and people are starting to say maybe they haven’t got the right judgement and maybe they’re not getting it right and they want to hear what the alternative is, and while we understand how things are complicated, I think we’re getting better at saying however, there is a simple thing you can do. So, it’s complex, the world oil price being high, but I think George Osborne should cut VAT back to 17 and a half percent on fuel tomorrow. Do that to give relief to people. That’s quite simple. In a complex world, to have some simple things you think you should do… that’s something that’s about being a good opposition.

John Denham

JO – Do you think this kind of industry is the future for this area?

John Denham – The future for the whole economy, including places like Liverpool, depends on a strong and diverse base of what we call the knowledge-based industries. Now that may be videogaming, it may be in the other parts of the creative economy. Indeed, in other parts of the North West it may be critical to the future of the energy industry in nuclear or renewable. What all those areas have in common is that they’re dependent on really high levels of education and skill, and it’s those areas that will enable the country as a whole to pay our way in the world in the future. And that is going to be critical to places like Liverpool.

JO – And how do you think that’s going to happen when I’m hearing from sixth formers that they aren’t even going to do A-levels because they know they can’t afford university. What’s the future for the skillset there?

JD – Well, clearly there’s a huge problem because some of the opportunities, the ladders of opportunity for young people, particularly for families with less money and for families who’ve got no tradition in higher education are being knocked away. Fees are going up, Education Maintenance Award [sic – he means ‘Education Maintenance Allowance’] are being taken away. As an opposition we criticise the government for those decisions. If you like, the blunt economic truth for individuals and the economy is that we must continue to raise those skill levels and encourage people into education, and I think frankly the government is going to need to understand the necessity of changing policy if these things don’t work. You’re right, we can’t afford to have a generation of young people saying I’m not going on to sixth form because EMAs been abolished.

JO – And what are Labour’s plans? Would you bring back EMA? Would you bring back AimHigher, were you to win the next election?

JD – We’re just at the beginning of a two-year, a 2-3 year process of policy review and to be honest my priority is being clear in a detailed policy in the run up to the next election. If you take higher education for example, we can be certain with our deficit reduction program that we would not have cut the funding of teaching in universities by 80%. So we wouldn’t have produced a £9,000 university fee. When I look at universities in three or four years time, we’ll have to do our spending plans there, because it’s not clear how the new system would work, even the government abandoned its plan to publish a white paper so they don’t know how the system’s going to work so what we can say is we’re committed to a number of principles. One is universities should remain essentially public institutions with a high level of public funding. Secondly, any graduate contribution should be paid fairly in a way that reflects people’s ability to pay. On EMA similarly we could have had a discussion on whether it should be reformed or better targeted, but to be in a position of simply saying it’s going to be abolished is wrong.

JO – The other thing I’m hearing is apprenticeships are like gold in this area. They are very difficult to get, there aren’t enough of them, they’re massively oversubscribed and there’s many people in this community who won’t necessarily want to do the academic route but they would love an apprenticeship. Is there anything the [opposition] is seeking to do on that?

JD – We increased the number of apprenticeships from 69,000 a year to 280,000 a year in the time we were in office. This government has said it will continue that expansion so as far as that goes we welcome it. We don’t think the expansion is enough, we have ambitions, Ed Balls and I, to guarantee an apprenticeship place to every young person who wanted one, which we thought would probably be about 15% of the 16-18 population at that age – rather more if you look at the number of people who want to do it at 18 plus. The figures at the moment probably suggest that the apprenticeship supply for young people will max out at about half that level. So that’s the gap. At the same time the government is cutting university places, and it is cutting by half a million a year the other types of training places for adults. So the difficulty we’ve got at the moment is that while we don’t criticise the government for the expansion of apprenticeships, they’re taking everything else away. Economically this is bad because it means when growth does come back, it will very quickly run into the problem of skills shortages. And similarly, people who have lost their jobs won’t be able to get the jobs that are created because they’ll lack the skills to do it.

JO – Has Labour been giving a mixed message on the cuts? Has there been a lack of focus on point-by-point going through the inconsistencies in the Tory messages and offering an alternative?

JD – First I think you have to set out the big argument, and the big argument is that the deficit was fundamentally caused by the global financial crisis. Not by British government policy.

JO – I think Labour didn’t get that across quick enough.

JD – Well, whatever the rights and wrongs of that argument we make that argument consistently. Secondly, the deficit has to be dealt with but not so fast and so recklessly that you do damage to growth and unemployment, which is what we think the government are doing at the moment. These are arguments that we have to continually put forward, week in, week out, month in, month out, until we’re sick of hearing ourselves say them. That’s when you begin to win the argument with the public.

Actually, most of the public think the government’s going too far too fast on the cuts, so we are more in tune with the mood of the general population. Where I don’t think we can go to is in doing a sort of detailed cuts plan of our own. You just can’t do that sort of detailed alternative CSR. But all of us have indicated areas where we recognise that we would have had to make some savings in government. While we wouldn’t have had higher education by 80%, nor could we pretend that higher education would have been immune. Whilst we wouldn’t have abolished the whole of adult training outside apprenticeships, we were putting training money into quite big companies like Tesco and Sainsbury’s that we probably wouldn’t have been able to make a priority. So the reality is in each area we have taken care to highlight the sort of things that realistically we wouldn’t have been able to do.

JO – Do you support the idea of the government’s universal benefit?

JD The idea of a universal benefit is very attractive, and we have to… I haven’t got my head around the details that Liam Byrne’s dealing with… the difficulty with it is that firstly by the time it comes in a lot of families will have been made worse off. It’s claimed that no one will be worse off but that’s because it ignores all the people who will all be made worse off before it’s introduced, because there’s a big cut to come. Secondly in practice it’s very difficult to design a universal benefit that doesn’t hit some people when it’s introduced. For the very simple reason that……..why is the benefit system complicated? It’s complicated because we’ve made extra provision for this or that, and if you simplify it you take away all those extra bits of provision. So we in principle are willing to work with the government on the delivery of a universal benefit, but we’ve got to see much more of the detail to see how it’ll work before we’ll be able to assess whether they’ll make a go of it.”