Rather than opposing the Tory-led government, Ed Balls is picking a fight with trade unions. Instead of focusing energies on stopping cuts to welfare, pensions, pay and public services, the shadow chancellor is telling us to learn to live with it.

An article in today’s Guardian begins:

‘Ed Balls, the shadow chancellor, has moved to challenge accusations that Labour is not credible on the economy by telling the public sector unions that he endorses George Osborne’s public sector pay freeze until the end of the parliament, and that he accepts every spending cut being imposed by the Conservatives.’

Green MP Caroline Lucas described it as ‘an odd relaunch – one that makes them even less distinguishable from the Tories’. Left-wing Labour MP John McDonnell commented that ‘for Miliband and Balls economic credibility means accepting Tory cuts and pay freezes. To me it sounds like capitulation to neoliberalism.’

At a time when the union movement is split over pensions – with the biggest public sector union Unison largely accepting the government’s terms for negotiations, while many other unions look to further strike action – this intervention by the Labour front bench is a clear message to accept the government’s ‘heads of agreement’. But it goes much further than that – and will trouble even the most painfully moderate of Unison or TUC moderates.

In the last two weeks there has been a series of indications that Labour’s leadership is tacking right and emphasising ‘realism’ (code for conservatism) about the economy. Liam Byrne’s provocative remarks about supposed ‘benefits dependency’ were the most outrageous, but there’s also been shadow defence secretary Jim Murphy stressing the need for cuts and Ed Miliband’s own talk about ‘accepting’ austerity this week.

These latest comments from Balls are perhaps the most important yet, offering real substance to Labour’s support for cuts from an authoritative figure. He refers, for example, to forthcoming ‘tough decisions’ on welfare from Byrne, making it clear the work and pensions secretary wasn’t simply expressing his own maverick worldview with recent remarks.

Many Labour activists have invested hopes in the shadow chancellor, seeing him as marginally to the left of the party leader and standing for an alternative to more of the same old Blairism associated with the previous Labour governments. He has just severely dented any such illusions.

The central issue is public sector pay. Balls argues:

‘There is no way we should be arguing for higher pay when the choice is between higher pay and bringing unemployment down. I know there will be some people in the trade union movement and the Labour party who will think of course Labour has got to oppose that pay restraint in 2014 and 2015. That is something we cannot do, should not do and will not do.’

It is hard to be more emphatic than that: Labour now openly supports the government’s public sector pay restraint for this parliament. There is a pay freeze for the next 2 years, with average annual rises of just 1% planned for 2014 and 2015. The cumulative effect, when inflation is accounted for, is a substantial pay cut for millions of public sector workers.

It gets worse. Balls states:

“My starting point is, I am afraid, we are going to have keep all these cuts. There is a big squeeze happening on budgets across the piece… At this stage, we can make no commitments to reverse any of that, on spending or on tax. So I am being absolutely clear about that.”

The assumption has tended to be that Labour, led by Miliband and Balls, would deliver cuts in services, pay and pensions but significantly slower and shallower, combined with a strategy for creating jobs and thus stimulating the economy. That would be a deeply flawed approach, but clearly preferable to the current coalition policy. The shadow chancellor is now insisting on acceptance, however reluctantly, of rapid and deep cuts.

It is false to juxtapose job creation to increasing pay for millions of working people. Reducing unemployment and increasing pay are both strategies that put more money in people’s pockets, enabling greater consumer spending and helping revitalise the economy. The current pay freeze is, like high unemployment, disastrous for prospects of economic recovery.

As the European crisis deepens, it is obvious the ‘tough medicine’ of cuts and privatisation is not working. Now more than ever, we need to articulate alternatives to the failed economics of George Osborne – and his European counterparts who are dedicated to the same destructive approach. The Labour leadership’s capitulation to a mythical ‘acceptance’ of austerity is the wrong approach in every way.

From Luna17