In a strongly worded article for the Guardian, setting out the battle lines for the coming weeks, the shadow chancellor writes that he would continue to cut the deficit if elected, but that the Tories have lurched to the right under a chancellor who is happy to move towards a shrunken, “35% state”.
Balls’s use of the phrase “centre ground” comes only days after Tony Blair used the same expression in an interview with the Economist, which was widely interpreted as a criticism of Ed Miliband for moving to the left.
His article will be seen as a rejection of Blair’s criticisms and other internal party critics. But it also demonstrates Balls’s conviction that Osborne has allowed himself and David Cameron to be portrayed as extremists by pressing ahead with public spending cuts.
In the article, Balls writes that last month’s autumn statement was a pivotal point in the fortunes of Osborne.
“There are moments in politics when, amid the fog of accusation and rebuttal, things suddenly become crystal clear.
“And it’s now clear that last month’s autumn statement was another of those rare defining moments – the day Chancellor George Osborne ceded the political centre ground to Labour,” Balls writes.
Osborne had an opportunity to change policies, but instead has persisted in cuts which will see tax revenues continue to contract, Balls says.
He writes: “In the runup to the autumn statement we all knew the ongoing squeeze on living standards was leading to a huge shortfall in tax revenues, throwing deficit reduction plans badly off track.
“What took everyone by surprise was that, in the face of forecasts that this loss of tax revenues would continue, Chancellor Osborne would choose to make up the shortfall with massively deeper spending cuts in the next parliament.”
Keen to emphasise that Labour will continue to cut public spending, Balls says the party will balance the books. However, he adds that the cuts planned by the chancellor will damage the health service and are driven by ideology, not necessity.
“Let me be clear, including to those who would wish it were not so: Labour will need to cut public spending in the next parliament to balance the books. But Ed Miliband and I do not believe a 35% state can be sustained year after year without causing huge damage to our National Health Service, policing, defence, local services and our economic infrastructure.
”George Osborne’s increasingly extreme and ideological approach goes far beyond the necessary task of deficit reduction. It is a risky second-term Conservative project to shrink the state – a lurch to the right which has left Labour as the centre-ground alternative,” he writes.
Last month, Osborne set out dramatic plans to move Britain from the red into the black that will see public spending as a percentage of GDP fall to its lowest level since the 1930s.
The plans, according to the Office for Budget Responsibility (OBR), presume the loss of a further 1m public sector jobs by 2020, a renewed public sector pay squeeze and a further freeze on tax credits. The OBR, in its analysis of the autumn statement, said that cuts after 2015 would see the total level of public spending fall to 35.2% of GDP in 2019-20, its lowest level in 80 years.
In the days after the autumn statement, Osborne was widely seen as having been rattled by criticisms of his plans. He accused the BBC of hyperbolic coverage and conjuring up bogus images of the 1930s depression. He was then drawn into a confrontation with Britain’s leading tax and spending experts after the Institute for Fiscal Studies (IFS) said he had a duty to spell out his deficit reduction plans and warned of cuts on a “colossal” scale.
Balls, who is still trailing Osborne on personal economic credibility, has been emboldened by the IFS and the OBR.
Blair told the Economist earlier this week that he was “convinced the Labour party succeeds best when it is in the centre ground”.
Stressing the importance of Labour “not alienating large parts of business, for one thing”, he added: “I am still very much New Labour and Ed would not describe himself in that way, so there is obviously a difference there.”
He added that May’s poll could become one “in which a traditional leftwing party competes with a traditional rightwing party, with the traditional result”. Asked if this meant a Tory win, he replied: “Yes, that is what happens.”
After reports claiming his words were a criticism of Miliband, Blair said he expected a Labour victory and had been misinterpreted.
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