Ed Balls: SATs? It's gas prices that could wreck Brown's autumn, warns his great ally

For a cabinet minister at the heart of a storm, Ed Balls is in a calmly expansive mood. The Schools Secretary has faced scathing headlines about exams that have gone unmarked or in some cases marked erratically. But Balls breezes confidently into his large office overlooking Westminster Cathedral and for the next hour and a half reflects in more detail than before on the chaos, as well as his distinct approach to city academies and faith schools. He also gives his candid view on what has gone wrong for Gordon Brown with whom he worked so closely for more than a decade, warning his old friend that the febrile situation will get worse for him in the autumn.

On the late delivery of some SAT results, Balls explains the sequence of events. "A contract was negotiated in 2006 with a new firm, ETS Europe. The contract specified different ways for marking and collating results and committed them to bringing forward the timetable for releasing the results.

"Back in March the Qualifications and Curriculum Authority (QCA), the body that negotiated the contract, was confident things were on track ... Only at the beginning of July did we hear that the marking was not on track and there were substantial computer problems."

He adds another detail. "I had a meeting with Ken Boston, the chief executive of the QCA, on 2 June. I asked him questions about marking, quality assurance and delivery and he reassured me that there had been some issues but that he had sorted them out".

Balls awaits the outcome of the independent inquiry this October to make a judgement on what went wrong. I ask him whether he will utter the words "I'm sorry". He chooses not to do so. " We really regret what's happened," he says. "We needed an apology from ETS. They have apologised and rightly so. Of course I accept responsibility. When I knew there was a problem we took two days to investigate what was happening, wrote to the Education Select Committee and set up an independent inquiry. I'm accountable for all of that."

Repeatedly he argues that it is important to have bodies acting at "arm's length" from ministers and that it would be the easy option for him to intervene directly now.

He reinforces a sense of disdain for the QCA by pointing out that last summer he set up a separate regulator to preside over the quality of exam marking. "If I had not done that the body reassuring us about quality would have been the QCA... If you want to see the case for that policy look at what has happened over the last two weeks".

More widely he remains keen on testing pupils at key points. He says that he does not want kids to be, "stressed out... but it's important they get used to the idea of tests". He also regards tests as important "objective evidence" in judging the performance of schools, although he stresses that they are not the sole criteria.

On city academies, Tony Blair's flagship policy, he claims to have introduced "big changes in the way we look at the relationship between schools and the local community". He points out that schools need the help of outsiders, such as mental health professionals or housing experts, so they are unavoidably rooted in an area.

Revealingly, he claims that the Blairite Schools minister Lord Adonis "told me a year ago that no academy should proceed without the support of the local authority". It had been reported that Adonis did not share Balls' enthusiasm for a relationship between academies and local authorities. "These schools are a progressive policy for tackling under-performance and deprivation," he says. "They must make their intake comprehensive, which means they must apply the admissions code." He summarises their role very differently from Blair, who described them as part of the post-comprehensive era. "They are doing what we want from comprehensive education. They are driving up standards and breaking the link with poverty".

He insists he is supportive of faith schools, but argues that it is not right for the Government to have as an objective an increase in their number. It is up to local communities. He is also adamant they must have a fair admissions policy. Earlier this year he announced that some faith schools were not following the admissions code, a move seen in some quarters as a crude attempt to woo the left. "I made the information available so that schools and local authorities could sort it out for next year and I did this in consultation with the faith organisations ...

"I celebrate the ways faith schools raise aspirations and take seriously their duty to promote community cohesion". But he repeats again his commitment to fair admissions.

Pointing to the Tories, he argues: "What you shouldn't do is support the admissions code and then attack me when it is implemented".

Balls sees education policy as a pivotal dividing line at the next election. It is an election that Labour risks losing heavily. As Brown's closest cabinet ally, what does he think has gone wrong for the Prime Minister?

"First we have seen a set of economic events that have not come together since the 1970s, a rise in oil prices plus what is happening in the financial markets which is a completely separate event. These have impacted on business and consumer confidence. With all these three happening at the same time it has had a huge impact on the standing of the government...

"Second, we have made mistakes. The 10p tax was a mistake. Other things have not gone right, sometimes through no fault of our own, sometimes because of ministerial decisions... Third, people wanted a change last June. Gordon Brown came in and he was the change. Because of the polls expectations grew of an early election. There was a real sense of choice between the parties. After the decision not to have an election the Conservatives have been under much less scrutiny".

Balls was an unequivocal advocate of an early election by the end of the Labour conference last year, but he reveals a new twist. "None of us went into the Labour conference last year thinking an early election was the right thing, but once the speculation began and once the planning had begun it was hard to reverse it."

So what should Brown do to recover? "It's going to get tougher before it gets easier. Higher gas and electricity bills will have an impact through the autumn and as you get closer to the winter this will become more of an issue". He pauses. "The question is how that whole process will be managed from the fiscal side, what happens to utility bills, the state of the financial markets".

He says the next six months will be difficult for Brown, but adds: "I don't think anyone believes a change of leader would do any good at all... Gordon has the experience, policy and vision."

In spite of some reports of a distancing between the two, he remains close. "I don't speak to him as much as I did when I was with him at the Treasury. The people who are there with him everyday are the most important. They are your team. But I was with him twice last week talking about the next few months, focusing on strategic objectives. That is the most important thing I can be part of".

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