ED Balls has launched a stinging attack on the “weak and feeble” regional bodies set up to replace Yorkshire Forward, warning business leaders that the Government’s new Local Enterprise Partnerships have “neither the resources nor the leverage to get things done”.
Speaking at a Yorkshire Post Business Club lunch just over a fortnight before Budget day, the Shadow Chancellor offered a wide-ranging critique of the regional, national and global picture, while responding to criticisms of his party’s own economic policy while in power.
Mr Balls hit out at the international credit rating agencies pressurising national governments, suggesting they are frequently “behind the curve” on global economics and lack sophistication in their understanding of markets.
The Morley MP went on to attack Chancellor George Osborne for making the preservation of Britain’s AAA credit rating such a key pillar of his economic policy.
But his strongest attack on the Coalition focused on its decision to scrap regional development agencies after coming to power.
“I’m not going to say Yorkshire Forward got everything right,” Mr Balls said. “But what it did do was make sure there was a business voice for local government and national government from a Yorkshire point of view... It gave a unified sense and had sufficient leverage to make a difference.
“The reality is the LEPs don’t have the capacity, the resources or the leverage to do what needs to be done.
“What really worries me is (whether) there is actually a strong enough business voice now on planning law, on skills law, on transport infrastructure, or a voice which has actually got the clout to lever some change.
“You need a sense of shared purpose.”
Mr Balls said he was “not anti-LEP”, but warned the new bodies are inevitably pitting one city against another. He highlighted the different bids lodged by Leeds, Sheffield and Hull to bring the Green Investment Bank to Yorkshire as an example of the lack of regional co-operation.
“I don’t think it sends the right signal,” he said.
Speaking without notes for almost two hours, Mr Balls said leading economists are still “kicking themselves hard” that they did not foresee the inherent risks within the banking system.
But he made it clear the same oversight afflicted politicians, regulators, governments and central banks across the globe.
“The reality is the Financial Services Authority, the Bank of England and the Treasury failed to see those risks – as was the case in New York, Berlin, Paris and all around the world,” he said.
Mr Balls added that suggestions Labour might have spent less during the economic boom, and so better prepared the UK for the downturn, were ill-informed.
He pointed out that tax revenues from the City collapsed when the credit crunch hit, causing the UK’s deficit to balloon by £150bn.
In such terms, he said, cutting an extra £5bn from the NHS would have been “neither here nor there in the bigger picture”.
He repeated Labour’s mantra that the Coalition is cutting “too far and too fast”, stifling growth and causing the deficit to rise.
And he had strong words for the credit rating agencies which have put such pressure on successive national governments over recent months, and whose conclusions are held in such high esteem by the Chancellor. “Credit rating agencies are fundamentally a lagging indicator,” he said.
“You can’t allow your policy to become dictated by (them). You end up making policies behind the curve.”
He highlighted the downgrade suffered by the US last year, and the subsequent improvement in that nation’s economic outlook, as an example of how agencies should not be followed blindly.
Anyone basing their investments over the past decade on the advice of credit rating agencies, he said, would have ended up with “a pretty bad investment strategy”.
Mr Balls was speaking at the Yorkshire Post Business Club, a forum for chairmen, chief executives, company directors and top advisers to debate the leading issues of the day.
DLA Piper, the international law firm, hosted the event at its office in Leeds.