Murnaghan 6.01.13 Interview with Ed Balls, Shadow Chancellor

January 06, 2013


DERMOT MURNAGHAN: Now, as the parliamentary year begins tomorrow the first battle will be over benefits and a big one it promises to be. The Labour party are making a stand and it’s not a popular position with some. In a moment I’ll be speaking to the Shadow Chancellor, Ed Balls, about that. Well let’s say a very good morning to the Shadow Chancellor Ed Balls and let’s dive straight in on this issue of benefits and the 1% cap which you say you will oppose. The Prime Minister is therefore calling you the party of unlimited welfare.

ED BALLS: Yes, he is and I think he wants people to believe, watching this programme, that he is going to cut in real terms the money that is going to scroungers, the slob like layabouts who aren’t working, who are never going to work but it’s not true, it’s a lie to be honest because the facts are that two-thirds of people who will see their income cut in real terms are in work, working people on lower and middle incomes, working part time or full time on low wages. Two thirds of them are women, people looking for work, trying to find work and can’t because the economy is in a bad state. These aren’t the feckless, the workshy, the people behind curtains whilst others go to work, these are striving people and why should they see their incomes cut while our Prime Minister at the same time is cutting taxes for the richest people in our economy, where is the fairness in that?

DM: But what should their benefits go up by? Should they stay with the existing formula of the Retail Prices Index?

EB: Well for the last three years benefits have gone up by inflation and it’s been a principle in our welfare state that benefits ….

DM: So they should stick with that?

EB: Well it’s a tough time but people who are seeing their wages under pressure are the same people who now see their tax credits cut in real terms and it’s a question of choices. Why would you spend £3 billion on income tax for the richest people and then try and take £3 billion from striving, hard-working families, where’s the fairness in that?

DM: I’ll ask you a bit more on that in a moment but just on the specifics of it, the last time benefits went up inflation was very high, they went up 5.2%, you want them to stay linked to inflation?

EB: Well look, inflation was very high for the last two years because George Osborne put up VAT which …

DM: But just on that, you’re opposing the 1% cap, what do you want to see benefits linked to? Definitely still linked to inflation?

EB: Well look, the history and the pattern for many years, including in the last two years in this government, is for benefits to rise in line with inflation, that’s the normal way …

DM: So you’d stay with that?

EB: The government is legislating to say they want it to be lower than that even though in the next couple of years wages will be higher and they are cutting top rate taxes. Now, the normal thing is to index and the government would normally have indexed in line with inflation and to be honest, I think that would be fair.

DM: So you would stay with that. Some people say well there is a halfway house, you could go with wages, because you cannot deny on this issue of fairness, over the last five years the rate of increases of benefits has outstripped that of wages and that seems unfair to those people who are working.

EB: And in the last ten years wages have been higher than …

DM: Well it depends where you pick the starting point but the last five years, the years of real difficulty, benefits have gone up at a faster rate than wages.

EB: And for the next two years wages are expected to go up faster than prices but we said, look, we support the 1% cap on public sector pay, for it to only go up by 1%. It’s a tough decision but in these circumstances where public spending is under pressure, you should put jobs first but what is happening is the very same people who are seeing their wages under pressure are also two-thirds of them in work will see their tax credits cut in real terms. These aren’t the shirkers, the skivers. Look, the vast majority of people out of work want to work. We said on Friday that for the small minority who don’t want to work we would make them work after two years, the vast majority of people looking for work – the unemployed nurse on £71, she wants to work but two-thirds are in work. Why is it fair, why is it we are all in this together for David Cameron and George Osborne to smear hard working striving families while they cut taxes ….

DM: Okay, I’m interested in the specifics we are getting out of you, so that is a specific pledge then, that you would uprate working age benefits in line with inflation? Keep the indexation link?

EB: No, look, I’ve made promises for the next manifesto, for the next parliament but you asked the question that …

DM: But you just said you would.

EB: Dermot, you know …

DM: You said you would keep it in line with index, with the retail prices index.

EB: I said George Osborne now should do that, absolutely but what I can’t do on this programme, two and a half years out, is start making any commitments about how we will make decisions …

DM: So you might cap?

EB: After 2015?

DM: Yes.

EB: You’ll have to wait for our manifesto.

DM: But you might cap them?

EB: Look, it’s not responsible for me as a Shadow Chancellor to come here two and a half years ahead and tell you what we can do about taxes or spending or benefits because look, the deficit is not coming down, it’s huge, it’s £200 billion more than George Osborne planned. We’re going to have a very difficult inheritance in 2015 but I can tell you this, we’ll have a welfare state which will get people into work, that will make sure that work pays more than benefits and will be fair and we’ve got a government which is cutting tax credits for working families and not getting people back into work. I don’t want that policy at all.

DM: So your position I can categorise as advice for the Chancellor on indexation?

EB: Absolutely.

DM: Okay, what about more advice for the Chancellor, and this is another area where it’s a bit hazy where Labour stands, the £26,000 overall cap on total benefits a family can get. Does Labour say yes or no to that? Could it go higher or should you cap it at £26,000?

EB: We support a benefits cap, we support a benefits cap but the Chancellor is setting …

DM: Of what?

EB: Well hang on a sec. The Chancellor is setting one cap for the whole country, one cap, which actually for some parts of the country could be high but in London is going to lead, as Eric Pickles the Local Government Secretary has said, to rising homelessness because rents in London are higher and you are going to have people thrown out of their homes. That’s going to end up costing George Osborne more. I’m not going to support a perverse policy that is not only unfair but costs more. We said we would like to have a benefits cap which has a higher level for London than the rest of the country and rather than randomly picking a figure, we should look at this properly, in the way you do with the Low Pay Commission on the Minimum Wage and find a level …

DM: So it could be what, £32,000 in London or something like that?

EB: What I’m not going to do today out of the air is pick a figure but I can tell you we’ll support a benefits cap, it will be higher in London than the rest of the country, it will be done in a way that won’t lead to homelessness but it will mean that you’ve got a grip on the benefits bill.

DM: Okay and lastly on benefits, it seems to have all been on benefits but there’s a lot going on about it of course, child benefits …

EB: Tax credits and benefits but saying benefits is saying what David Cameron wants you to say because he wants you only to talk about the unemployed.

DM: Okay but child benefits, there’ll be big change happening overnight tonight, from midnight tonight.

EB: I know, we’re all finding out about it …

DM: You talk about fairness and it may not be perfect in its implementation and they are trying to keep it simple to keep the costs down but it seems relatively fair, doesn’t it, that those very high earners lose their child benefit?

EB: It’s a shambles, it’s a complete shambles. We’re going to have many, many hundreds of thousands of people who will end up filling in tax returns because they didn’t realise they were supposed to apply by today not to get their child benefit. If you are a one earner family on £60,000 you lose it, if you are a two earner family on £75,000 you keep it – what’s fair about that?

DM: So should everyone keep it, keep it universal?

EB: I’ve always supported a principled approach to the welfare state which we would call progressive universalism, some things are universal – a universal basic pension, universal child benefit but then also targeting, to make sure that people on lower incomes and middle incomes get more than people on the highest income. The problem with this child benefit change is it’s perverse because you get more if you have a higher income and you lose if you are on a middle income, where’s fair about that?

DM: Okay, Shadow Chancellor, time’s up, thank you very much indeed. No doubt you’ll be back plenty more during the course of 2013 to discuss progressive universalism and many other things. Ed Balls there.

On Twitter