Ed Balls: 'Most people don't see there's a different, better way. That's my challenge'

Is Ed Balls the man with the plan? The shadow Chancellor tells Andrew Grice he's just working on his Labour instincts

A year ago, Ed Balls admits now, he was "isolated" and "exposed". He warned there was a "global hurricane" coming and that the Coalition Government was cutting "too far, too fast". He called for a Plan B long before it was fashionable.

Politically, too, Mr Balls looked isolated. He came a distant third behind the two Milibands in Labour's leadership election and didn't land the shadow Chancellor's job he coveted.

Now, slowly but surely, the centre of gravity in the economics debate appears to be moving his way. And Mr Balls, who finally landed the Treasury brief in January after a brief interregnum at Home Affairs, is described by Shadow Cabinet colleagues as an "immensely powerful" force at Labour's top table. On both economics and politics, he has bounced back. A marketing man might not have designed it, but the party's two most powerful figures are two "sons of Brown", both long-standing aides to the former Prime Minister.

The Balls mantra that the Coalition's cuts must be slowed is no longer a minority view. Yet Labour gets precious little credit for it. The party averages only a three-point lead in the opinion polls and trails badly on economic competence. Why? Interviewed in his Liverpool hotel room as he prepared for his big speech to the party conference today, the energetic, irrepressible Mr Balls is as certain of the answer as he was when he predicted economic doom last year. The shadow Chancellor does not do self-doubt. Nor, some fellow frontbenchers grumble, does he show enough humility about Labour's mistakes in power – they say because he was so closely linked to Mr Brown.

Mr Balls is utterly convinced the economic argument is starting to move in Labour's direction. "The perception that this [the Coalition's] course is the only and right one and is going to work is changing," he says. "But most people don't see there is a different, better way yet. That is my challenge. It is hard to be the answer to the question when people are not asking the question. People are just starting to ask it. We have not persuaded them we are the answer."

He admits: "We had just lost the election, having presided over the biggest global financial crisis for 100 years, so people say, 'Are we really ready trust the people who were part of causing the problem to solve it?' That is a huge task for us."

When Mr Balls became shadow Chancellor, he told Labour MPs no one would know the state of the UK economy until this October, and that Labour would not know whether it could convince people it was "the answer" until next May. "Ed Miliband and I are trying to do this in two years. It took Labour a lot longer than that after [its defeat in] 1979 and the Tories a lot longer after 1997. So I am not underestimating the scale of the challenge."

He has been round the same course before: in 1994, when he left his job as a Financial Times leader writer to work for Mr Brown. "It is probably harder for Labour than the Conservatives to persuade people [in opposition]. We are the optimists, the doers. It is much easier if you don't believe government makes a difference, you would rather cut spending anyway and have a small state.

"In 1994, we couldn't assume that John Major's and Norman Lamont's failure would deliver credibility for us. We had to prove it. And now we can't assume that David Cameron's and George Osborne's failure will do it for us. We have got to prove that we deserve to be trusted, that we can be credible."

The shadow Chancellor refuses to take the easy option, as some colleagues urge, of conceding the Coalition's approach is basically right so that Labour can plant itself firmly in the centre ground. Nor is he an enthusiast for the "mea culpa" strategy of confessing Labour's mistakes in power. "I have said quite a lot, and I will say some more... but I have absolutely not spent the last six months telling everybody how brilliantly Labour did. People want to know that if you make mistakes, you admit them and we should do that. But you don't answer the question about the future by spending your whole time talking about the past. Of course the Tories want that. It is a trap."

He has a blunt message for his Labour critics. "There are always some people in every political party who want to go into introspection. In 1979 those people won the day in Labour for years. In 1997 they won the day for a bit in the Conservative Party. They are absolutely not going to win the day in the Labour Party now. If we don't talk to the country every day until the general election, then we can't win. The country doesn't want us to go on about the past. They want an answer, some hope, some optimism about the future and to know we can be trusted."

He refuses to admit the Labour Government overspent, as that would only help the Tory campaign to blame the UK's deficit on Labour, which insists it was caused mainly by the global crisis. He dismisses sniffily "the idea that saying we spent money in a profligate and imprudent way helps me to persuade people we can spend in a sensible and prudent way in the future... And it's not true."

So how will Labour regain trust? Mr Balls says we will have to wait until much nearer the next election. As a first step, Labour will show its "instincts" now.

What, then, are its instincts about Mr Osborne's plan to abolish the 50p rate on earnings above £150,000 a year? Mr Balls insists the Chancellor's move will not persuade Labour to say it should be permanent. He says it should remain until the next election, but not as a matter of principle.

"My instinct is that you should always try to reduce every tax if you can. But in this parliament, the idea that the priority is going to be cutting the top rate of tax when child benefit is being cut, VAT has gone up, people are seeing their living standards squeezed, I find that very hard to see."

Alistair Darling, the former Chancellor, insists the 50p rate should be temporary and has admitted Labour lacked credibility on the economy at last year's election. Has Mr Balls read Mr Darling's book yet? No, he replies, it has joined an ever-growing pile of untouched "summer reading" which includes the memoirs of Tony Blair and Lord Mandelson.

Mr Balls hardly comes out of them well, but he is not losing sleep. Nor is he ruffled by Tory plans to portray him and Mr Miliband as the "sons of Brown" at the next election. "David Cameron, George Osborne, Ed Miliband and I, we are a new generation of politicians. We are not from the era of Michael Howard, John Major, Gordon Brown or Tony Blair. I don't think the Conservatives are a going to hang the past round my neck any more than we are going to hang the failure of Black Wednesday round theirs." [Mr Cameron was Chancellor Norman Lamont's special adviser when Britain was ejected from the European exchange rate mechanism]. People want to know who has got the answers and who can show they are going to be tough and optimistic, to be credible and radical."

With his usual certainty, Mr Balls is convinced the Coalition will be forced to change course, as global conditions deny it the export-led recovery it banked on. The irony, he argues, is that political agreement is disastrously lacking in the eurozone and the United States, while the political agreement reached in the UK is the wrong one. "My dilemma is that I can't believe how heavily George Osborne, David Cameron and Nick Clegg have boxed themselves in. It is making it harder for them to change course. At the same time, I really want them to change course."

He dismisses claims that any change to the cuts strategy would be counterproductive because it would spook the financial markets, saying they are "grown up" and want a credible plan.

"In my view, in the end, they will change course. If they do it in a better way, we will support it. We won't play politics with it."

I am not sure Mr Osborne will believe that, but Mr Balls looks serious. "Personally, I don't care whether they call it Plan A, B or C. You have got to have a plan that is working. This one is not working."

If Mr Balls's prediction about the Coalition comes true, then his one about Labour getting back in the game may come good too.

Life in brief

Born: 25 February 1967



Education: Nottingham High School and Oxford University, where he gained a first-class degree in philosophy, politics and economics before reading economics at Harvard as a Kennedy Scholar.



Career: Started as a leader writer for the Financial Times before being appointed an economics advisor to Gordon Brown in 1994. Served as Secretary of State for Children, Schools and Families from 2007-2010 and became Shadow Home Secretary in 2010. He took over as Shadow Chancellor of the Exchequer in 2011 after the resignation of Alan Johnson.



Personal life: Married to the shadow Home Secretary, Yvette Cooper, making them the first married couple to serve together in the British Cabinet. He has a minor speech difficulty and in 2010 was elected Patron of the British Stammering Association.

Insiders say tensions are a thing of the past between the 'two Eds'

A fortnight ago, Ed Miliband and Ed Balls sent each other their draft speeches for this week's Labour conference.

Nothing remarkable about that, perhaps, but it is a far cry from the Blair-Brown era.

Mr Balls reveals that during Labour's 1996 conference, on the night before Gordon Brown's keynote speech, he and Tony Blair discovered they planned to use exactly the same line. They both wanted to reflect the theme tune for the Euro 96 football championship in England by saying: "Football's coming home, Labour's coming home."

Mr Brown had to back down. "He was furious and angry and threw his speech around the room," Mr Balls recalls.

He is making the point that, even though they fell out over Mr Brown's "non-election" in 2007, he and Ed Miliband now work well in tandem.

Mr Balls says he "totally understood" why Mr Miliband did not appoint him shadow Chancellor a year ago.

Labour insiders admit there have been tensions between the "two Eds". But they say Mr Miliband now recognises that Mr Balls' judgment on the Coalition's cuts strategy and the global economy has been "spot on".

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