Sunday, February 19, 2012

Balls prepares to U-turn

Today Ed Balls announced that he’s going to stop calling for a temporary VAT cut.

Not in so many words, of course. What he actually did was repeat his call for a 12-month cut in the rate of VAT – which he first proposed last June.

However, this given Labour an awkward problem of timing: Balls has been arguing for “combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan”. But this leaves the question of what happens when we get to the medium term. He will have to say ‘You know that stimulus we wanted? Well, even though we didn’t get it, it’s too late now, so now we want austerity instead.’

The other question this position left open is: when will we get to the medium term? Today Balls answered that:

In my view, the Chancellor does still have the power to shape events. Next month’s Budget is his last chance to make a real difference to Britain’s economic prospects. …the Chancellor should announce a temporary reversal of his VAT rise.

There you go: next month’s Budget is the last chance.

So after that passes, with George Osborne once again inexplicably deciding not to abandon his policy on Balls’s say-so, Balls will abandon his policy and stop urging a 12-month VAT cut. Possibly, as the year goes on, he’ll urge a VAT cut lasting 11 months, 10 months, 9 months and so on. Or maybe for simplicity’s sake he’ll throw in that particular towel straight away.

But one thing’s for sure: 12 months from now, Balls won’t be calling for a temporary fiscal stimulus. Definitely not. Definitely.