James Forsyth
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Balls vs Osborne threatens to be one of the bitterest parliamentary clashes in a long time. When Alan Johnson was appointed shadow chancellor, Osborne — in Washington at the time — scrambled to make a congratulatory call to his new opposite number. This time, he didn’t bother. It was not a moment for pleasantries.
The pair have, as Osborne puts is, been circling each other for years. Balls was Brown’s chief adviser, Osborne the Tories’ chief Brown-baiter. Now, at last, they confront each other face to face.
Gladstone and Disraeli’s rivalry was held in check by the fact that Gladstone had a cordial relationship with Disraeli’s wife. But there is no such constraint on the Osborne-Balls rivalry. These two are free to engage in vicious conflict.
The two Oxford graduates are playing for high stakes. Both of them regard economics as the continuation of politics by other means and the economy will almost certainly determine the result of the next election. So whoever wins their duel will be the architect of their party’s victory at the 2015 election and the firm favourite to be its next leader.
Osborne’s allies acknowledge that Balls will be a more active and aggressive opponent than Alan Johnson. They are bracing themselves for his guerrilla tactics, which are designed to wear down his opponent. Sleep patterns will be disrupted by press statements released late at night and first thing in the morning; there’ll be a flood of parliamentary questions and freedom of information requests; and Sunday newspaper mischief designed to destroy the other side’s weekends.
Despite this, the Tories are confident that Balls makes their overall task strategically easier. Osborne, who remains the Tories’ chief election strategist, believes his twin mission is to nurture an economic recovery and persuade voters that Labour ruined things last time, and cannot be trusted with the economy again.
The presence of Balls, they believe, will make people associate Labour party with economic calamity. Despite Balls having been a backroom boy for most of Labour’s time in power, internal Tory polling shows that he is the politician most closely associated with Brown in voters’ minds. As one close friend of Osborne says, ‘Balls is the embodiment of the Brown record.’
Every time Balls criticises the coalition, Osborne will respond by pointing out that it was Balls’s fiscal rules that failed and that it was Balls who devised the system of financial regulation which allowed the banks to do what they did. They intend to make Balls a captive of his past.
Balls, however, has scored the first hit. This week’s provisional GDP figures, which show that the economy shrank by half a percent in the final three months of last year, have supported Balls’s argument that the recovery is too anaemic to cope with the Tory cuts. Balls also sensibly used the cover of this news to put some distance between his current position and his previous predictions of a double dip recession and his opposition to halving the deficit in four years. One Downing Street source says ‘we’ve been surprised by the speed and size of his U-turn.’
In the medium term, however, Osborne remains on stronger ground. This year will be a choppy one for Britain financially, but by 2013 the economy should start growing at a decent clip. It is hard to see where Balls can go if the economy starts to expand. Growth combined with the selling of government stakes in the banks will give Osborne a considerable war chest to play with.
Ed Miliband’s team has long been aware that Osborne will almost certainly go into the next election offering substantial cuts in direct taxation. This would pose a dilemma for Labour. If they match the Tories’ tax cuts, then they would be forced to choose between increased spending and fiscal credibility. If they oppose them, they’ll find themselves on the wrong side of the tax question, as they were in 1992.
But Osborne’s whole strategy depends on growth. Without it, Balls will be free to claim that the cuts have killed the recovery and that only Labour can get Britain on its feet again.
Osborne v. Balls might not be the new politics. But it will shape our political future, and it will determine whether Gordon Brown’s legacy is undone or cemented.
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