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Page last updated at 12:40 GMT, Sunday, 30 January 2011

Transcript of Ed Balls interview

On Sunday 30th January Andrew Marr interviewed Shadow Chancellor Ed Balls MP.

Please note 'The Andrew Marr Show' must be credited if any part of this transcript is used.

ANDREW MARR:

Now then, Ed Balls has wasted no time. He's got stuck into his new role as Shadow Chancellor. When those disappointing growth figures came out, he told George Osborne to "rethink his strategy and get a plan B" - advice which Mr Osborne has made absolutely clear he has no intention of taking. Both men, not I think mutual fans, seem to relish what is now a very stark argument between Labour and the government about the economy. And Ed Balls is with me now.

ED BALLS:

Good morning, Andrew.

ANDREW MARR:

Welcome. Are you happy to be seen as the embodiment of Gordon Brown's financial record?

ED BALLS:

I think it's a bit more complex than that and issues like making the Bank of England independent and not joining the single currency, I think those are seen as being really good decisions which will stand the test of time. I think also the health service, financed by the tax rise in 2003, was a great decision. But on banking …

ANDREW MARR:

Well let's turn to some decisions which might be a little bit more …

ED BALLS:

… some tougher things - some tougher things, yeah.

ANDREW MARR:

You think on banking, you got it wrong, because you did produce you know the rules which then didn't work?

ED BALLS:

I don't think that it was the rules which were wrong. It was the way that they were applied throughout the decade and all around the world.

ANDREW MARR:

But you take responsibility for that?

ED BALLS:

Well, look, Alan Greenspan, the American Finance Minister, Britain, Germany, France, Italy, Japan - we all got it wrong on financial regulation.

ANDREW MARR:

Including Gordon Brown and Ed Balls?

ED BALLS:

Well, of course. Everybody got it wrong because in the world we didn't see the scale of the risk which was happening. And to be quite honest, there was nobody really in British politics who saw that either.

ANDREW MARR:

Okay, well that's very frank. Let's turn to the structural deficit because that's still at the heart of the argument between yourself and the Conservatives. It is true to say, is it not, that in the run-up to the financial crisis Britain was running the worst structural deficit - that's the extra beyond the cycle - of any of the G7 countries?

ED BALLS:

I don't think we had a structural deficit at all in that period. We had a deficit …

ANDREW MARR:

(over) We had a £37 billion structural deficit, didn't we?

ED BALLS:

… but we were covering that by investment. We were covering that by investment. The fact is we had fiscal rules, which were to borrow to invest, but to keep the current account in balance. There was a debate in that period in 2005 or 6 as to whether or not we needed to go two billion here or there. In fact taxes went up in a couple of those budgets. But the fact is that our debt was low, our economy was strong. We went into the financial crisis in a much better position than many other countries, but we got hit really hard by what happened with the banks.

ANDREW MARR:

But you can hardly say there wasn't a structural deficit in the run-up to that crisis?

ED BALLS:

No. Look, the issue was …

ANDREW MARR:

Not only was there a structural deficit at that point. It was the largest of any of the G7 countries.

ED BALLS:

Look, we had a deficit. Yes, we had a deficit.

ANDREW MARR:

That's what the OECD says.

ED BALLS:

There was definitely a deficit. Was there a structural deficit? I don't think so. The current account balance was pretty much in balance over the period adjusted for the cycle. We were borrowing, but to invest, and that was always consistent with our fiscal rules. Our debt was low. We went in with lower debt than other countries. We did fix the roof while the sun was shining. In fact we made decisions which were opposed by the Conservatives - for example to use the proceeds from the mobile phone auction to get our national debt right down. So …

ANDREW MARR:

So when Tony Blair says that in 2005 you should have been cutting spending and getting the deficit down much more seriously than you were, and when Alistair Darling (who was then the Chancellor) says that by 2007 you were spending too much, are they both wrong?

ED BALLS:

I don't think Tony Blair is right to say that, and, to be honest, I don't remember that being said at the time. There was not a big debate about the structural deficit in the government at that time because we had low debt and we were meeting our fiscal rules. And, look, for the whole of the last …

ANDREW MARR:

(over) But there was a fundamental savings review that Tony Blair was desperately trying to get you and Gordon Brown to take part in …

ED BALLS:

(over) Yeah, but the iss…

ANDREW MARR:

(over) … so you knew that he was trying to get this under control.

ED BALLS:

But the issue, Andrew, was not about the deficit. Tony Blair was never a prime minister who was saying get the deficit down. He was saying can we have less public spending. I think he was looking for tax cuts.

ANDREW MARR:

(over) And you were saying no.

ED BALLS:

But that is a perfectly legitimate debate. But, look, the Conservatives have spent the last four or five days hawking round, trying to say that I was responsible for what went wrong. It's quite important to remember the debates we had at the time. David Cameron said he would match us on spending. George Osborne said we were doing too much financial regulation, not too little. There was no …

ANDREW MARR:

(over) Sure, but you understand, you were in power at the time, it wasn't them.

ED BALLS:

(over) There was no call from the Conservatives at the time, or from anyone else really, to have a fiscal tightening in that period. We went to the crisis with low debt. It's the decisions which have been made in the last couple of years which really deserve the scrutiny.

ANDREW MARR:

One last go on this, if I may …

ED BALLS:

Okay, sure.

ANDREW MARR:

… which is that in that period, as I say before the train hit the buffers, there is now a perception that Labour was spending too heavily and too much because in your words - I don't know if it was your phrase originally - there was going to be no return to boom and bust; that in a sense the business cycle had been abolished. And we see this again and again over history - people think it's gone and then it comes back again and bites them on the bottom. But that is a fair criticism, is it not?

ED BALLS:

Look, no government ever spends every penny wisely, and if you're a chancellor or a shadow chancellor you're always looking to do better. We had the Gershon Review in 2004 to make savings in the public sector - the right thing to do. But do I think that we were spending too much or that too much spending caused the crisis? On both those fronts, absolutely not. We had public support for the investment in the health service and in education. We actually had our debt lower than other countries and lower than the Conservatives. Nobody thinks…

ANDREW MARR:

(over) And the phrase 'no return to boom and bust'?

ED BALLS:

Apart from the Tories, nobody thinks that spending caused this downturn. It was a global financial crisis. That was the issue. And, look, the issue …

ANDREW MARR:

And no more return to boom and bust? You must regret that?

ED BALLS:

The issue in 1997 was having had eighteen years of Conservative governments who would make mistakes on interest rates, stoke up a boom, to then have the bust afterwards. We made the Bank of England independent. We put those days behind us. Look, there are ups …

ANDREW MARR:

(over) So when Ed Miliband says - as he did on this show - that Labour needs to return … needs to "regain its economic credibility", why does he say that?

ED BALLS:

Because it's really important. Look, we've just gone through this huge financial crisis and people are saying can Labour be the people to sort things out?

ANDREW MARR:

Yes.

ED BALLS:

And for six months, they've been told by David Cameron and George Osborne there's only one solution - cut the deficit now, we're the guys in charge and we know what we're doing - and I think that's really rather changing that perception. But look …

ANDREW MARR:

(over) Now you mentioned interest rates, so let's move onto …

ED BALLS:

(over) But Andrew … Before you do, if I was to come on your programme and say we got everything right in the last thirteen years, you'd laugh at me because of course we didn't. But we got some really important decisions right, like on the euro. We made some brilliant decisions like on the health service and the minimum wage …

ANDREW MARR:

(over) I'm just wondering about really now…

ED BALLS:

(over) …and on regulation, we didn't get it fully right.

ANDREW MARR:

… whether you think that that level of spending just ahead of the crash was right, or whether you would accept that you were overspending a bit at that point?

ED BALLS:

I don't think the issue of spending before the crash was an issue which caused the crash …

ANDREW MARR:

No.

ED BALLS:

… and I don't think we were overspending.

ANDREW MARR:

Okay, right. Let's move on. You mentioned interest rates and so on. The Bank of England has got a very, very difficult dilemma - not only now, but probably for months ahead - when we see these last very disappointing growth figures, negative growth figures and yet inflation is growing again. What's your take on what Mervyn King is doing as Governor of the Bank of England at the moment?

ED BALLS:

I think he's been quite right not to raise interest rates. And that's a matter for the independent Bank of England, but he's made the right calls. As he said this week, the inflation is being driven not by consumers and wages, but by the exchange rate and also by the VAT hike we've seen this month which has definitely made things much harder. But I think that, look, it's really important that Mervyn …

ANDREW MARR:

And by food and oil prices shooting up …?

ED BALLS:

(over) Food and oil prices, but the VAT rise as well. But I think it's really important that in an economy where the big issue is the stagnation of growth, it's very important that he resists pressure - and we've had it from the Conservative party to raise interest rates - he should resist that pressure, he should hold his nerve, but also he can't do it all on his own. In America, you've got the Treasury and the Federal Reserve both doing things together to support growth. Here the Bank of England is doing all the work to support growth while the Treasury is making it much, much harder with the VAT rise, the crushing of spending, and I think it's very important …

ANDREW MARR:

(over) He says the country's on the right track.

ED BALLS:

Well I think if the Governor of the Bank of England was to come out and say the country's on the wrong track, that would cause a crisis. I don't think that Mervyn King in his heart of hearts really believes that crushing the economy in this way is the right way to get the economy moving. It's not what other countries are doing, it's not what many economists think is the right approach, and it's not working. We've just seen it very clearly in these figures, the fourth quarter last year. We were told by David Cameron we were out of the danger zone. Suddenly the economy has ground to a halt for very good reason.

ANDREW MARR:

Do you think he's being lent on?

ED BALLS:

The Governor?

ANDREW MARR:

Yes.

ED BALLS:

I think the Governor is being loyal. I think there will be part of him which is worried about the need to get the deficit down.

ANDREW MARR:

Because this week, this week he said "we're on the right course and it's important to stick to it".

ED BALLS:

I know, but the fact is he is under huge pressure because the economy isn't growing. It's grinding to a halt. And it's not just the real wage squeeze, which he says is inevitable. It's not just the inflation issues from round the world, which he can't control. There is also a VAT rise, which is making his job harder. He's got Michael Fallon saying put interest rates up, David Cameron warning about inflation, and he's got a Treasury which is actually putting all the emphasis on growth onto him. In the US, they're taking a different approach and you can see that very clearly in the figures. The US Treasury Secretary said only yesterday or the day before that to slam on the brakes, to cut spending this early, to stifle the recovery is the wrong approach; and it's the approach which we're taking and I think it's very difficult for Mervyn.

ANDREW MARR:

A lot of business leaders here are also critical of the government, but they are saying the government should cut income tax top rate of 50p and should slash back quite a lot of regulations - presumably employment regulations and so on - to allow growth. But you'd be against both of those things.

ED BALLS:

Well, look, it's always important to get the right balance of regulation and it's important …

ANDREW MARR:

So you think there should be a bonfire of regulations to help growth?

ED BALLS:

I think you should always look to find regulations which are necessary, which you can get out of the way. Although I find businesses saying to me that abolishing the regional development agencies, cutting back on our science and investment budget - these are things which are going to make it harder to get growth. But in the end, for all the micro initiatives you have here - a policy lever here, a policy lever there - the fundamental issue on growth is what's happening to the economy. And if you've got the government continuing in denial, claiming that there would be turmoil if they were to cut spending now … The turmoil is going to come, as George Soros was saying only last week, if Britain is the only economy which stalls while others are growing. George Osborne, the only plan B he needs to get right now is a plan B to stop the drastic scale of these spending cuts, to look again at these tax rises, and to realise if people aren't in work paying taxes, then you can't get the deficit down in a sensible way.

ANDREW MARR:

And if that doesn't happen, do you think we're now heading towards a double dip recession?

ED BALLS:

I don't know. I really hope not. It's only one quarter, although to see unemployment rising as well shows you that things are going in the wrong direction. The VAT rise and spending cuts don't really start impacting until in these months, so it's going to get harder, not easier, and with the inflation pressures as well. We don't know. It is not the central outcome. I think it is more likely that we will bounce along. But the important thing, Andrew … (Marr tries to interject) … But he important thing is it's a choice. George Osborne, he's got to get out of this denial where he thinks there's only one approach. There's no doubt he's a good politician, but is he a good chancellor? Good chancellors are flexible, they change their minds when the evidence changes. (Marr laughs) I see no signs of flexibility here.

ANDREW MARR:

I'm trying to get the words flexible and Gordon Brown together in my mind and struggling slightly, but we'll put that to one side. By your own admission, you got it wrong first time round when you said that Alistair Darling's plan to halve the deficit over four years was unsustainable and couldn't be done.

ED BALLS:

Well, look a…

ANDREW MARR:

I mean have you changed your mind firmly on that?

ED BALLS:

A good chancellor always has to be cautious and worry about the risks, and I said …

ANDREW MARR:

Because, after all, the figures have changed again since you said that.

ED BALLS:

I said to Alistair and to Gordon back in 2009, I was worried that with us coming out of this huge financial crisis, with unemployment rising, even halving the deficit in four years would be really, really hard to achieve. The fact is the economy was growing more strongly and unemployment came down. Actually Alistair's plans, actually Alistair's plans …

ANDREW MARR:

(over) So if you were chancellor now, if you were chancellor now, would you be beginning to implement the cuts - the Alistair Darling cuts as it were…

ED BALLS:

Sure.

ANDREW MARR:

…In ten weeks time?

ED BALLS:

Well, look, Alistair's plans delivered twenty billion lower borrowing than even he was expecting because of a set of policies which have now been completely thrown out the window. We've now got the VAT rise immediately, the spending cuts happening as well. The economy has gone into reverse, so we're now in a very different context. If we were in government, we would be halving the deficit in four years. If we were in government, there would be …

ANDREW MARR:

You would be?

ED BALLS:

Yes.

ANDREW MARR:

And you would therefore have to start cutting in ten weeks time?

ED BALLS:

Well, look, there would be difficult things we would have been doing on policing, on schools where I set out clear decisions, to make difficult decisions on spending. But look …

ANDREW MARR:

(over) And sorry, just one last thing …

ED BALLS:

No but Andrew …

ANDREW MARR:

… on the plan that you put out in the Bloomberg speech. The 50p rate you said should start at £100,000 a year and you were slightly ambiguous when you were talking about that speech recently as to whether that was still in or out.

ED BALLS:

Well, look, that was what I was saying during a leadership election campaign. We've not sat down and discussed tax policy. Our position is clear: we think that for this parliament, and probably into the next, we'll keep the top rate of tax at £150,000. We're having a debate around a whole number of different things. But the fact is the context now has changed going into the next financial year because suddenly the economy's slowing. What is George Osborne going to do to get this economy moving? Are spending cuts now at the right approach on this scale? Definitely not. He needs to get to a different plan.

ANDREW MARR:

A fascinating argument ahead. Ed Balls, for now thank you very much indeed.

INTERVIEW ENDS




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