The architect of New Labour's economics

Diane Coyle reports on the career of Ed Balls, the most influential adviser on the Chancellor's team
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The Independent Online
The naming of the first members of Gordon Brown's new Council of Economic Advisers should not distract attention from the fact that the most influential adviser in the Treasury, and the chief architect in the construction of post-Tory Britain's economic policy, is a 30-year- old who, so far in his brief career, has been a student and a Financial Times leader writer.

The remarkable influence of Ed Balls stems from the fact that he has imported from America a radically different intellectual current. Mr Balls deserves much of the credit for making over the party's economics in New Labour clothes.

New Labour is not very interested in macroeconomic policy - choosing the right level of government borrowing and interest rates. When the Chancellor says the Government will be responsible about borrowing levels and the inflation target, he means it. The new economics is orthodox about these issues, preferring to tackle the interesting problems where governments can probably achieve something.

This means looking at policies concerned with the ``supply side'' of the economy - its wealth-creating potential - such as taxes on capital, training, welfare benefits and the structure of the jobs market.

The young Ed's intellectual conversion took place at Harvard six years ago. The child of an academic biologist, his early education at Nottingham High School was followed by a degree in Philosophy, Politics and Economics at Keble College, Oxford. He then went on to win a Kennedy Scholarship to study for two years at Harvard University.

Harvard has a strong claim to be the world's most elitist academy, as well as one of its best. And one of the priciest too - its fees are up to $30,000 (pounds 18,000) a year. Despite the cost, though, it does not quite achieve the same social exclusiveness as Oxford. But it caps even Oxbridge for intellectual arrogance. The assumption that Harvard students are superior is added to the food in the canteens, delivered with the lectures and proven in the job market.

Students are lectured by people who have reached the top of their professional tree, and the best - like Ed Balls - can work closely with academic superstars. In his case it was Lawrence Summers, a 42-year old economist who is now a senior Clinton administration official.

Academics hold Mr Balls in very high regard, and his intellectual credibility has helped the Chancellor. But some see a catch with the new approach in its vulnerability to fashions, to any new twist that seems to make economic theory fit the latest data better.

One of Larry Summers's senior Harvard colleagues finds the whole approach gimmicky. He says: ``You can be too clever by half with this method.''

It is a view that is shared by some commentators in this country. Giving his assessment of the Government's first 100 days, Simon Briscoe, head of research at investment bank Nikko Europe, says: "There has been a focus on good PR at the expense of well thought-out policies."

He finds Labour's economics long on rhetoric and short on action, adding: "We must hope that the Government does not fall for its own rhetoric."

One casualty of the Treasury team's emphasis on the presentation of policies, in which Mr Balls is helped by Gordon Brown's spin-doctor, Charlie Whelan, is civil servant Jill Rutter, the former head of the press office. Although clearly one head of press is enough, her sudden departure has not helped allay suspicions that rhetoric will continue to play too great a part in economic policy. Another frequent criticism is that Mr Balls lacks the long sweep of experience. Of course, this might just be the sour grapes of older and less successful economists.

But one thing that does put people off is his intellectual certainty. Until they feel the lash of his intellect, impatient with their slowness, people tend to like him. He has the politician's talent for flirtation and charm when he tries - with, by all accounts, the predictable effect on many of his female colleagues.

He swiftly learnt everyday political skills in Mr Brown's office, but the first thing everybody says about this Young Turk of the world of economic policy is that he is a good footballer. In the world of New Labour a lot is made of soccer affiliations. Ed supports Norwich and Arsenal.

More significantly, he plays in the amateur Thames League - for the Financial Times team. He did not sign for Labour's Red Menace team. Old Labourites read a lot into that. One of the Labour team's players draws the conclusion: ``Gordon Brown has a tradition of taking activists and deactivating them.''

Mr Balls is a long-standing and committed Labour Party member. But it is the fact that he is New Labour through and through that cements his importance in the Treasury.