UK Politics

It's not the eurozone, stupid

  • 14 November 2011
  • From the section UK Politics
  • comments

That, in short, is Labour's message this week. Ed Balls believes that the government is using the eurozone crisis as a convenient cover for the failure of their own economic policies.

This is what the shadow chancellor told the Politics Show:

"Our slowdown happened before the euro crisis, we've grown slower than other European countries, we've got bigger rises in unemployment... our exports to the euro area have gone up by 17%.

"It's consumers and businesses who are losing confidence and being hit by this very, very foolish, rapid contraction in fiscal policy - trying to cut too far and too fast."

In a week in which we may see youth unemployment top a million (albeit that that number will include many students) and the Bank of England issues another gloom-laden prediction, this is an argument that matters.

A fortnight before the chancellor's Autumn Statement it is one that will grow in importance - providing, of course, that we are not engulfed by then in a major escalation of the eurozone crisis.

When I put it to George Osborne last week that the eurozone crisis was politically convenient for him, he replied vigorously to the effect that nothing could be less true. His eyes told a different story.

The chancellor knows that were it not for the crisis in Athens and Rome he would now be facing questions about the failure of the private sector to replace the jobs being cut from the public sector and demands for a plan for growth.

Labour will spend this week promoting its own five-point plan for growth which has, at its heart, a VAT cut costing £12bn to promote consumer spending.

Ministers reply that the questionable gain of any multiple-billion-pound boost (after all it didn't work for the US, they say) would be outweighed by the huge potential pain of the markets questioning whether the government had lost its nerve.

So, for the moment, the Treasury seems set on trying to take advantage of Britain's low long-term interest rates to underwrite private sector investment in infrastrastructure and house building.

Both government and opposition agree that something is needed to get Britain moving again. The confidence that will come from a resolution of the eurozone crisis is a necessary but not a sufficient part of that something.

More on this story