Ed Balls: Why we need a new direction for UK and a fair deal for region

This newspaper’s Fair Deal campaign would be a good place for the Chancellor to start. As I said to business leaders in Leeds on Friday, the campaign offers a blueprint for the sort of growth boosting and job creating measures our economy is crying out for.

Our economy has now flatlined for nearly three years, lending to businesses is falling and prices are rising faster than wages. Despite recent falls, unemployment remains too high in Yorkshire with the number of young people on the dole for over a year almost doubling in the last 12 months. And this economic failure is why the deficit is now rising.

So what can be done? As the Fair Deal manifesto says, we should bring forward infrastructure investment now – in our road network, accelerating the roll-out of super-broadband and delivering high speed rail to our region.

These are vital investments we need to make now to strengthen our economy for the future. A major programme of affordable house building – using the funds raised from the 4G mobile phone spectrum auction – would provide the homes we need and get construction workers back to work.

Lending to small and medium sized businesses needs to be boosted. That’s why Labour has proposed changes to the Government’s Funding for Lending scheme, reforms of our banks to promote more competition and a British Investment Bank. And we should go further than the Government’s national insurance holiday only for new businesses and use all the unspent money allocated for it to expand the scheme to all small firms taking on extra workers.

Temporarily reversing the Government’s VAT rise would boost spending power and help our struggling high streets, while a VAT cut to five per cent on home repairs would boost many small businesses.

We need active government at all levels using all the levers at its disposal to get our economy moving. Abolishing Yorkshire Forward was a short-sighted decision, as even Ministers now seem to be recognising in their backing for Lord Heseltine’s proposals. Local areas should have the powers and resources they need to get growth going and create jobs.

And we need to do more to get people back to work and get the benefits bill down. Labour wants a guaranteed job for every young person out of work for a year or more and every adult unemployed for over two years – a job they will have to take up or lose benefits – funded by a fair tax on bank bonuses and restricting pension tax relief for those on over £150,000 to the same rate as basic rate taxpayers.

A strong and sustained recovery can only be made by the many, not just a few at the top. It cannot be right that in a few weeks millions on middle and low incomes will pay more through cuts to tax credits, child benefit, maternity pay and the bedroom tax, while the very highest earners on over £150,000 get a tax cut.

We need fair tax cuts for people on middle and low incomes, for example by bringing back a new lower 10p starting rate of tax – paid for by a mansion tax on homes worth over £2 million. This would be a tax cut for over two million people in our region and put right a mistake Labour made in the past.

Of course, David Cameron says any action to kick-start the economy will lead to more borrowing. But the Government is already borrowing more to pay for the costs of their economic failure. If confidence is crushed, businesses go bust and long-term unemployment soars, the Government gets less from tax revenues and the benefits bill goes up. That is why the deficit is rising this year and the Government is set to borrow £212 billion more than planned.

This doesn’t make sense. A steadier and more balanced plan – sensible spending cuts and tax rises, together with measures that create jobs, invest in infrastructure and reform our economy for the long term – would be fairer and more successful in getting the deficit down.

Families and businesses in our region cannot afford more of the same failing policies today. We need a change of direction and a fair deal for Yorkshire.

• Ed Balls is the Shadow Chancellor and Labour MP for Morley and Outwood.