A “DANGEROUS” pessimism risks paralysing the North East unless the Government changes economic course, Shadow Chancellor Ed Balls has told The Journal.
In an exclusive interview, Mr Balls said Prime Minister David Cameron was shooting the economy in the foot by pushing ahead with spending cuts regardless of the fact that growth had stalled and unemployment was soaring.
He claimed people were crying out for an alternative, having been told by the coalition Government that there was no choice but to tackle the national deficit.
Mr Balls said the failure of Chancellor George Osborne’s spending review a year ago, raising taxes as well as cut public sector spending and jobs, was now “obvious” with confidence and people’s spending power sucked out of the economy.
He said: “He said it would work. But it was totally dependent on this view that cutting the public sector would unleash private sector investment and job creation. If you don’t have the private sector investment and job creation, and you end up with unemployment going up, that means you have got more people out of work on benefits, fewer people paying taxes.
“And that is fundamentally how you get deficits down, by having more people in work paying tax not less,” said Mr Balls, who claimed the Chancellor’s promise to reduce the deficit faster than Labour was “going up in smoke”.
The Shadow Chancellor added: “I don’t think anyone would deny that the North East economy was stronger at the end of a Labour Government than weaker.
“People will look at the first year of the new Government as a year of economic stagnation. And the great unknown is how long this is going to last.”
He said the ongoing “massive” global financial crisis meant people would find it “hard for a while” and that Labour did not get everything right. But action could still be taken to improve the outlook for the North East and UK.
He said repeating a bank bonus tax would raise £2bn to build 25,000 social houses across the country – around 800 in the North East – and create 5,500 jobs for young people, with 10% of those posts benefiting this region.
