John Rentoul: Balls barks up the wrong tree

The Shadow Chancellor was unleashed on George Osborne's Budget but, wrongly, went for the banks
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The Independent Online

Budgets are a menace. Someone once said that the US electoral college system was to blame for global protectionism, because it made presidential candidates pitch against free trade to try to win big states such as Ohio. I don't know if that's true, but it is certainly the case that the Budget ritual causes much unnecessary complication in the British tax system. This year's was no exception.

George Osborne's presentation of himself as the Great Tax Reformer, sweeping away 43 tax reliefs and 100 pages of tax law, was a dreadful fraud for which the Chancellor conspicuously failed to summon the enthusiasm to convince even himself. Tolley's, the tax law book, has 10,000 pages, I am told, and Osborne didn't count the pages he added to set up Enterprise Zones, a fiddly scheme for first-time homebuyers, and all the other sand he threw into the machinery. Indeed, he fiddled and tinkered and complicated just as much as Gordon Brown.

Osborne thinks that this is what the theatre of the occasion requires. He is so slavish in his adherence to the New Labour way, and so spooked by the incessant commentary about rabbits and hats, that he felt he must have a series of strong news stories to make the Budget a success.

It might have been a stronger news story if he had said some weeks ago that the Government's fiscal strategy was on course and that there was no need for a Budget until 2014. The 1p cut in petrol duty and the rise in tax on North Sea oil were trivial changes that could have been announced at any time. Apart from all the counter-productive complications, that was pretty much all that was in the Budget. Some of the more "eye-catching initiatives", such as taxing private jets and merging income tax and National Insurance, were consultations about what might happen in the long grass. The planned speed and scale of tax rises and spending cuts was unchanged from that set in the "emergency Budget" last year.

The big question, therefore, is whether that basic stance is right. Ed Miliband did a reasonable job of saying it wasn't, although his response was not as good as Harriet Harman's last year and his delivery bore some telltale marks of the Brown steamroller: repetition, cut-and-paste soundbites and no argument at all.

There are two traps here, and Miliband has fallen into one and been pushed into the other. First, public opinion seems to be opposed to "the cuts". Opinion polls increasingly show that people agree that the Government is cutting too far and too fast. That may have helped Miliband make his fundamental error of judgement in agreeing to speak at yesterday's TUC march.

The other trap is that he was forced to appoint Ed Balls as Shadow Chancellor, who is convinced by the economic arguments against early, deep cuts. Actually, the arguments are difficult and finely balanced. The stimulus of higher government borrowing against the depressant effect of too much debt. Vince Cable, the Business Secretary, failed to puncture what he called Balls's "bumptious self-confidence" in the Commons on Thursday. Balls may even be right.

But neither finding an echo in mid-term public opinion nor being right is any use when it comes to winning the next election. By then, the cuts will have happened. For most people, they won't have been nearly as dreadful as they seem in prospect, and the debate will probably have moved on to how the proceeds of future growth should be shared. Provided the UK hasn't disappeared into a double-dip default crisis, the academic economists' argument about who was right will have become – apologies – academic. Balls may insist that it would have been better not to have cut so far so fast, but he won't be able to prove it.

This is where Ed Miliband is the authentic son of Brown. He ran for the leadership claiming to "speak human" but, despite a surface plausibility, he seems to lack emotional intuition. Brown was given a copy of Drew Westen's book The Political Brain about the role of emotion in politics, by David Muir, his director of strategy, in the hope that he might take from it a lesson in communication. But, as Tony Blair said of Brown: "Analytical intelligence, absolutely. Emotional intelligence, zero."

It does not matter who is right about the path of deficit reduction over the next three years. What matters is that people feel that Labour left the public finances in a terrible state, and that they will need a lot of persuading to trust the party again. Nor are the voters being unfair in this: they recognise that part of the problem was caused by a global financial crisis for which Labour was not responsible. But they also know that Brown was borrowing money all through the boom years when he should have been saving. They even know that the Conservatives supported him at the time – yet it was a mistake and the Labour Party has to take responsibility.

The emotionally intelligent response would be to acknowledge that mistake. Instead, Balls used his Budget response to apologise for the wrong thing. He accepted that bank regulation had not been perfect. That is a side issue – the credit bubble would have burst however it had been regulated. What voters want to hear is that Labour accepts that it was careless with taxpayers' money, spending what it hadn't got and landing future taxpayers with the bill. Until that message gets through, taxpayers won't trust it with their money again.

Instead, the message that was carried loud and clear from Labour's response to the Budget and at the TUC march was that it is opposed to "the cuts" and wants to spend more of the money that taxpayers hope to earn in the future. A member of Brown's cabinet told me that he thought the former prime minister's mistake was the "Calais fallacy" – that if the voters, like French shopkeepers, did not understand, you had to repeat what you were saying more loudly.

That, it seems to me, is the mistake still being made by the Opposition.;