Peter Hoskin

Balls and Miliband fail the credibility test

Balls and Miliband fail the credibility test
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Eds Miliband and Balls gathered the press corps together this morning to broadcast a straightforward message: oh yes, we do have an alternative. And the shape of that alternative? A repeat of the one-off tax on bankers' bonuses that, Balls claimed, raised £3.5 billion last year. The money would be used for an entire buffet of economic delights, from the creation of new houses to the funding of job schemes for the young. The upshot, apparently, would be 110,000 new jobs. Nice work, as they say — if you can get it.

But there are a couple of problems with all that, the first of which Labour has pre-empted. It is that last year's bonus tax may not have raised as much as £3.5 billion, after all. After knock-on effects to bonus payouts, and the amount by which they are taxed, it is estimated that the Exchequer actually made around £2.5 billion from the measure, or perhaps even less. This is why the Two Eds today gave £2 billion as a "cautious estimate" for how much their reheated version of the tax would raise. Yet here's the nub: even that might not be cautious enough. As a reality check (and this is not something we do often on Coffee House), let us hear Gordon Brown, writing in his book, on why a bonus tax could not be repeated:

"However, in this form it had to be a one-time boom; by now the banks have restructured their remuneration packages in order to avoid having to pay a similarly constructed tax in future."

The second problem is simply around the jobs figures that Labour is using. Generally speaking, one should always be wary of the claim that a policy will "create" a certain number of jobs. The labour market is an unpredictable beast — those jobs may not transpire, or they may have transpired without government action. Predictions that masquerade as fact are still just predictions: they could be wrong. Besides, specifically speaking, there are concerns about Labour's last effort to ease young people into the labour market — particularly in the number of young people who actually held on to their jobs after six months.

Having said that, there's little doubt that Labour is skirting around a populist, and potentially popular, economic message here — however disingenuous it might be. Higher taxes on the banks to pay for jobs for the young? More action on the cost of living, and particularly fuel duty? None of this adds up to a proper economic policy. But it does increase the pressure on Osborne to talk growth in his Budget next week.