Tribune column by Ed Balls MP
2 November 2012
Two years ago David Cameron boasted that "Britain was out of the danger zone". And what followed? The longest double-dip recession since the Second World War as his deeper spending cuts and faster tax rises choked off the recovery.
So when David Cameron said at Prime Minister's Questions last week "the good news will keep on coming" there will have been eyebrows raised at the Treasury and the Bank of England. It smacked of the same complacency we've come to expect from the Prime Minister.
There was indeed some good news the following day when official figures confirmed that, with the help of the Olympics, Britain had finally come out of a double-dip recession which only one other G20 country has gone into.
But the Prime Minister's complacency the previous day was misplaced. Our flatlining economy is only the same size as a year ago. In the two years since the spending review we've had just 0.6 per cent growth – compared to the 4.6 per cent George Osborne said his plan would deliver and 3.9 per cent growth in America.
Long-term unemployment is rising, while business lending is falling. And the result of this slow growth and high unemployment is that borrowing in the first half of this year has actually been higher than the same period last year.
With living standards falling, energy prices soaring, more tax rises on low and middle income families and pensioners on the way, and the eurozone still in crisis, it would be very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best.
We need action, not complacency. So there are three tests for the Chancellor's crucial autumn statement next month. First, on jobs, growth and deficit reduction in the short term. Britain urgently needs a plan to secure and sustain a strong economic recovery and catch up all the lost ground of the last two years.
That is why Labour is calling for a jobs plan to boost the economy, including using funds from the 4G mobile spectrum auction to build 100,000 affordable homes, a temporary VAT cut and a bank bonus tax to fund jobs for young people out of work.
The government still has no plan for growth and, as they are starting to find out, without strong economic growth you cannot succeed in getting the deficit down. If their current strategy really is working, as Ministers continue to claim, then the autumn statement should see the very gloomy forecasts we saw in this year's Budget for economic growth revised up and borrowing revised down.
Second, we need long-term reforms to strengthen our economy and ensure that other countries do not continue to race ahead of us. This should include a British Investment Bank properly backed by the Treasury to boost lending to small and medium sized businesses, a long term plan to rebuild our infrastructure and radical reforms to separate retail and investment banking.
The omens are not good here either. Banking reforms are being watered down and business is rapidly losing confidence in the government's ability to make long-term decisions as Ministers dither and delay on big questions about our infrastructure needs for the future.
Third, we need fair action to help people on low and middle incomes with the rising cost of living. The Chancellor would be well advised to use the autumn statement to rethink his plan to give a tax cut to millionaires in April while putting taxes up for pensioners.
The Conservatives cannot claim to be a One Nation party when next year they raise taxes on pensioners, make families and businesses pay more in fuel duty, take away child benefit from middle income families and cut help with council tax bills for those on the lowest incomes, while the only people getting a tax cut are the very richest earners in our country.
On jobs and growth, a long term plan for our economy and fairness our complacent Prime Minister and Chancellor have a few weeks to finally change course.
If they fail to do so then it will be even clearer that only Labour is the One Nation party that can deliver the change Britain needs to make our economy fairer and stronger, get the deficit down and ensure people are better off.
Ed Balls is the shadow chancellor and Labour MP for Morley and Outwood