Three reasons why Ed Balls will not make as much difference as some think

With the resignation of Alan Johnson and the promotion of Ed Balls to the shadow chancellor brief Labour now have someone with an economic background in the most important role outside of the Leader of the Opposition's office. In fact given the current economic situation it could be argued that the shadow chancellor is even more important than the LOTO right now.

He is being heralded to great cheers by most within Labour and is lauded as an economic big hitter by much of the media. However there are three reasons why I think Ed Balls may not make as much of a difference as many people think. And in fact he could become a millstone around Labour's neck.

1) The obvious first point is that he is very closely associated with Gordon Brown. He was his chief economic and political confidante right through from opposition in 1994 to when Brown became PM in 2007. Even then he was still one of his closest political allies. Given how much influence he had over Brown it is going to be quite easy to paint him as culpable in various ways for the economic problems the country now finds itself in. The only way to extricate himself from this is to denounce important parts of what Gordon Brown did and I cannot see that happening. So he is damaged goods before he even starts.*

2) The economy is in a bad state. There is a huge deficit and a growing public debt. The coalition government has embarked upon a strategy that focuses primarily on cutting the deficit with the aim of bringing the public finances to order. There are risks involved with this approach and it might all go horribly wrong in the next few years. Labour in its first 8 months in opposition have made it clear that they would not have enacted many of the cuts announced by the government and whoever is shadow chancellor it is clear that Labour's message in one way or another is going to be less cuts and more "investment" with growth being the driver to reduce the deficit. If the economy does go south and it can be demonstrated that the government's plan has failed then the governing parties' strategy will be shot to ribbons. If however it does work then Labour will find it very difficult to win the next election, after all they will be seen as not only having presided over the problems in the first place but also to have been on the wrong side of the argument as to what to do about it. And frankly it does not really matter too much who is in the role of shadow chancellor for how this will play out. It is largely dictated by economic events over the next few years.

3) The hype is too great. I have lost count of the number of times I have read phrases like "economic big hitter" and "he will land punch after punch on Osborne" in the last 48 hours. Yes he is an economic expert (although point 1 does diminish his claims on this somewhat) and he did well at attacking the government during the Labour leadership campaign but the expectation management has gone seriously awry. If he does not come out of his corner and continually land knock-out blows on Osborne and the government in the next few weeks then the narrative could very quickly start to turn. Stories about him having been a damp squib and perhaps not such a great candidate for the role will start to filter up. The press love to knock people down off pedestals and the way he has been built up so far leaves him very exposed to this possibility. If I was Ed Balls I would be furiously trying to play down my likely initial impact. The truth is that there are not so many opportunities for opposition economic spokespeople at this stage of the electoral cycle anyway. Even when the budget comes around, lest we forget it is the Leader of the Opposition who will stand up initially in the House of Commons to respond to the Chancellor. Balls will not actually get the chance to even try and land punches directly after the showcase economic event of the year. We are more than 4 years from a general election. Balls' value to the opposition is likely to be in building a strong and coherent economic policy basis to move forward on but if the hype continues he may not even get the chance to do this before he is already deemed a failure.

Don't get me wrong, I think Balls is a smart appointment to the role (although I actually think appointing Yvette Cooper would have been smarter for various reasons which I may blog about in future) but he is unlikely to live up to expectations and he comes with probably the heaviest political baggage of anyone else on the Labour front-bench.

*I am aware that a similar charge could have been levelled against David Cameron as he was an adviser to Norman Lamont in the early 1990s and was even pictured hovering behind Lamont when he made his now fateful Black Monday announcement. Indeed Gordon Brown relished making this connection over and over again and it never seemed to do Cameron much harm. The big difference is that Cameron was a very junior adviser to Lamont for a relatively short time after which he went off to do other things in the private sector before coming back as an MP in 2001. The link was pretty weak and hence the attacks were quite ineffectual too. Balls' situation is very, very different and attacks on him for his links to Brown are much more likely to stick.

Why Alan Johnson's NI "gaffe" matters

On Sky News on Sunday morning, it became clear during questioning by Dermot Murnaghan that the shadow chancellor Alan Johnson did not know what the rate for employers' national insurance is. It is 12.8% although Johnson seemed to think it was 20% at one point.

This has been seized upon as a "gaffe" by the media and Johnson's political opponents. Often these situations when a politician makes a slip are hugely overblown by the media and on many occasions I have found myself lamenting the way such things are covered.

However in this case I really do think it is important. I run my own business (along with some partners) and I am responsible for the company's financial affairs. Therefore I regularly have to sign off on financial transactions and also perform calculations based upon people's salaries. I am only too aware that every time the gross salary is considered, you have to multiply by 1.128. So I can look at this situation of the perspective, not of a politico but someone who signs the cheques for a small business.

That the shadow chancellor does not even know what the rate of employers' NI is a very poor show from where I am standing. I know he indicated he was a bit of an economics novice when he first started in the post but he has had months to get up to speed now. At the very least he should know what the different rates are. They should be absolutely at the forefront of his mind, not least because one of their main policies is to raise the NI rate. The fact that he does not means that he is not properly on top of his brief. For the chief opposition finance spokesperson in parliament to not be on top of this will just drive a wedge between him (and his party) and the millions of people in this country who run businesses.

Can you imagine any of the recent holders of the office of shadow chancellor to have been so sketchy on something like this? Alistair Darling, George Osborne, Oliver Letwin, Michael Howard, Michael Portillo are those who have held this post in the last decade and I am sure all of them were fully up to speed with the main rates of tax and NI.

I think Johnson has used up most of his nine lives now. He has caused other problems for Ed Miliband in the last few months and there has been a suspicion that some of them have been deliberate mischief making. This latest one was obviously not deliberate but I suspect the Labour leader's patience is wearing thin.

I would not be surprised if he was shuffled out of his post at the next available opportunity.