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Balls May Step Up Challenge to Osborne on U.K. Budget

Ed Balls gives an interview near Parliament in London. Photographer: Oli Scarff/Getty Images
Ed Balls gives an interview near Parliament in London. Photographer: Oli Scarff/Getty Images

Jan. 21 (Bloomberg) -- Ed Balls, named Treasury spokesman for the U.K.’s opposition Labour Party yesterday, may intensify the battle over budget cuts with Conservative Chancellor of the Exchequer George Osborne.

Balls, one of former U.K. Prime Minister Gordon Brown’s closest allies, was responsible for many of Labour’s flagship economic policies when the party held power from 1997 to 2010. Alan Johnson, who resigned the Treasury post for personal reasons, said when he was appointed in October that he needed to read up on economics, and both Osborne and Prime Minister David Cameron accused him of not mastering his Treasury brief.

The new Labour spokesman is “a good fighter, and he’s probably going to get a few points under the belt, but you have got to remember that he was the ideas man behind the Brown spending bonanza,” Stewart Robertson, chief European economist at London-based Aviva Plc, said in a telephone interview. “He’s more of a traditional Labour man: he likes spending.”

Balls, 43, promised to step up attacks on the Conservative-led government’s plan to virtually eliminate the budget deficit within four years and try to convince voters that Labour’s policies of cutting spending more slowly would preserve public services and sustain economic growth.

“It doesn’t have to be this way -- it’s recklessly fast,” Balls said of Osborne’s program on BBC News television late yesterday. “The risk is that you make the deficit worse. That’s a lesson of history.”

Balls’s Junior

Balls helped Brown draw up plans for the biggest increase in public spending since World War II. He’s now in the second most important opposition job after Labour’s leader, Ed Miliband, who was junior to Balls when both worked for Brown at the Treasury.

Balls has been one of the most vocal critics of government plans to slash spending, eliminating a forecast 330,000 public-sector jobs. The budget deficit peaked at 11 percent of economic output last year, when Brown lost power in an election.

The new spokesman said today he would follow the policy espoused by Johnson and the last Labour chancellor, Alistair Darling, that the budget shortfall should be narrowed by 50 percent over four years.

“I’m clear if there was a Labour government today we would be halving the deficit over four years,” Balls told BBC Radio 4’s “World at One” program.

‘Too Severe’

That’s a softening of the line Balls took when he ran against Miliband for the Labour leadership last year, finishing third. He argued in a speech in August that deficit reduction should not start until 2012 and that Darling’s plan was “too severe to be credible or sustainable.”

Balls told Radio 4 that economic growth had since proved “stronger than we expected.”

Cameron joked about Johnson last week, telling Parliament “the shadow chancellor cannot really do the numbers,” citing his failure to recall details of social-security contribution rates in a television interview.

The Conservatives moved quickly to attack Balls.

“He was Gordon Brown’s chief lieutenant and deficit denier-in-chief,” the party’s deputy chairman, Michael Fallon, told the BBC. “It is an extraordinarily regressive appointment.”

Family Reasons

Johnson said he was resigning for reasons “to do with my family,” without giving further details. He married for a second time in 1991 and has four children by his two wives.

The reshuffle of the Shadow Cabinet, as the opposition team is known, gives Miliband a chance to focus his leadership of Labour after media criticism that he has failed to connect with voters or articulate policy clearly.

In the revamp, Balls’s wife, Yvette Cooper, 41, assumes his former home-affairs portfolio, while Douglas Alexander, the international development secretary when Labour was in office, takes over foreign affairs from Cooper.

The appointment of Balls may enable Miliband to shed the tag of “Red Ed” and appeal to the center, said Steven Fielding, director of the Centre for British Politics at Nottingham University.

“It may allow Miliband to display himself as more moderate, by contrast with his Treasury spokesman,” Fielding said in a telephone interview.

Summers at Harvard

Balls became education secretary when Brown succeeded Tony Blair as prime minister in 2007 after being a junior minister at the Treasury. He joined Brown as an adviser on economic policy when Labour was still in opposition in 1994 after studying under former U.S. Treasury Secretary Larry Summers during a sabbatical at Harvard University.

Balls credits himself with convincing Brown to hand power over interest rates from the Treasury to the Bank of England in 1997, advocating the move as early as 1992 in a pamphlet for the Fabian Society, the group that provides intellectual underpinnings for Labour Party policies. He also lobbied Brown to restrain spending during his early years in office, helping Labour break with its past reputation for economic mismanagement.

It also was Balls who turned Brown against adopting the euro when a dozen European nations started using the currency in 1999.

Labour got a boost last week when they retained a parliamentary seat in northwest England in the first special election of this Parliament. A YouGov Plc poll published Jan. 19 showed Labour leading the Conservatives in voter support by 42 percent to 37 percent. The next general election is not scheduled until 2015.

To contact the reporter on this story: Gonzalo Vina in London at

To contact the editor responsible for this story: James Hertling at

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