Thursday, 20 January 2011

Ed Balls now has Miliband in the palm of his hand

I haven't really got time for this, but...

The Alan Johnson resignation this afternoon came as a shock.  The affable former postman might have taken to his new brief like a duck to a shooting range, and he wasn't joking about needing an economics primer, however who genuinely saw this coming?

The embarrassing gaffes have not helped.  Not only have they damaged Labour presentationally, they have wounded a good man's pride.  No one enjoys being ridiculed, especially about their maths gremlins.  And honestly, as much as I like Johnson, telling a BBC journalist that they "probably read more" of the last Labour budget is a self-deprecation too far for a Shadow Chancellor.

But strategically, Johnson was still useful for Ed Miliband.  I wrote in October that the choice of Johnson was "strikingly astute" as it tied up a critical colleague and reassured the public that Labour would pursue a credible economic policy by backing Alistair Darling's deficit reduction plans.

The alternative - Ed Balls - had long advocated a softer policy that would put further investment, growth and recovery ahead of deficit reduction and higher taxes for the rich to mitigate spending cuts.  When it came to the decision, Miliband rightly acknowledged reality and plumped for Johnson, sending Balls off to shadow Theresa May.

Since then, however, Labour's economic message, driven by Miliband and Johnson, has been a 'me-too' muddle: opposing some cuts but broadly agreeing that the deficit had to be addressed.  Miliband's leadership has never got off the ground, paternity leave or not.

Meanwhile, Ed Balls has been in combative mood, impressing as shadow home secretary, most recently in portraying the Government's hokey-cokey dance over Control Orders as playing party politics with national security.

He has also not been keeping his dissatisfaction with the Labour leadership's economic policy to himself.  As early as the CSR you could tell he was fuming inside as he watched Alan Johnson stand up to deliver a happy-go-lucky slapstick routine when Balls' well-reviewed Bloomberg speech would have been more effective, to put it lightly.

As wicked irony would have it, had Ed Miliband appointed Ed Balls as his Shadow Chancellor back in October, the new leader would probably have been able to command a certain amount of authority over his defeated challenger.

Now, however, Balls is in the ascendency and in spite of a good victory in Oldham last week, Miliband is struggling.  Personal dynamics are also important.  When Gordon Brown was Chancellor, Balls was his right-hand man (apparently unable to make decisions without consulting him) whereas Miliband was a junior adviser.   On economic policy (at the very least) it will be Balls, not his leader, who will be running the show.

The Government can use this to its advantage if it can successfully paint Ed Balls as the man who, along with Gordon Brown, got the country into its present mess.  If the spinners can manage to depict Miliband as the 'son of Brown', Balls is a much more obvious target.

Yet allow Balls to gain even an inch and he'll take not one yard but ten.  Say what you like about him - he is a consummate political operator.  His first task is likely to be to attack the Government over inflation and VAT - on both counts he can turn his involvement in the last Labour Government to his advantage.  Back then, he and Brown presided over the NICE decade - the Governor of the Bank of England wasn't writing many letters to the Chancellor in those years.  There are myriad reasons why the analogy is inadequate but that never stopped a good soundbite.

And VAT, which is contributing to rising inflation and crucially inflationary expectations, is a topic on which Ed Balls actually has some credibility.  It was Balls who, before the last General Election, insisted that Labour must pledge not to raise VAT.  He was correctly and honourably overruled by Alistair Darling.

Now that Balls is calling the shots, he can tell us all that he was right all along.  Don't increase the regressive VAT, which hurts ordinary hard-working British families - put up taxes on the rich instead.

I sometimes hear Conservative backbenchers confiding that the man pulling the strings in Government is George Osborne.  Now his opposite number will be doing the same for Labour.  And like Osborne, Balls is a scheming politician to the bones: they are always sniffing around for dividing lines.

However it all pans out, you can count on something.  The Chancellor can say goodbye to relaxing skiing trips to Klosters.  With Ed Balls conducting the Opposition's orchestra, he'll be lucky if he gets a spare weekend.

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