How can he possibly be so stupid? You have to understand, first, that neither Ed Balls nor Ed Miliband have any real experience of business or how the economy works. Balls was briefly a Financial Times journalist, but Ed Miliband has been paid almost entirely by the taxpayer throughout his professional life — whether as a Gordon Brown stooge in the Treasury or as an MP.
They have never run a company, either of them — never come close. They have never had to rise at 5am to get the shop ready; they have never had to go and beg for a loan from a bank; never dreamt of a new product, or a new market, and then struggled to make it happen. Neither of them have had the experience of hustling or pounding the pavements or hitting the phones in search of bigger profits. They don’t even like the idea of profit. They turn their noses up at it. They don’t understand that our whole economy and society — our ability to pay for the poorest and neediest — depends entirely on the willingness of a relatively small number of people to put in the back-breaking hours that will create the companies and drive the innovation that will employ the people whose payrolls yield the taxes that pay for the whole damn caboodle.
They cannot bring themselves to accept that these business people are moved by the forgiveable desire to make money — and that if you allow them to keep a slightly bigger proportion of their earnings, the evidence is actually that they will go out and make more.
That whole way of thinking is repulsive to Balls and Miliband; it is outside the realms of their experience. They think of business as a sort of money tree that it is their right to harvest. They fail to understand that unless government is careful, the tree won’t produce any fruit at all. That is the politest explanation for the idiocy of Ed Balls — that he is ignorant of how a market economy works.
But then there is another, worse interpretation: that he knows what he is suggesting is wrong, but he doesn’t care. Balls and Miliband will have studied the polls, and these show a large measure of support for the 50p rate. Even though Britain’s top rate is now above the EU average, most people back the 50p income tax policy in the belief that it will take more from the rich — despite the Laffer curve showing that the opposite is true. In other words, Labour is planning to hike tax rates not because it is sensible economics, but because they think it is good politics.
Well, I think this is wrong, and that Labour will pay a huge price for misreading the electorate. In the end, people want policies that offer hope, ones that will encourage entrepreneurs to found and invest in great companies. Balls and Miliband think they are being clever by seeming to bash the rich — a group that does not have a great many defenders. What they fail to see is that they are simultaneously sending out another powerful hostile signal, that they would spend their time in office attacking the very operation of the market economy.
People can see this. They can detect the real instincts of the Labour party — now way to the Left of New Labour: populist, anti-capitalist and anti-business. Unlike Ed Balls, people have the common sense to see that you can’t be anti-business if you expect business to employ enough people and make enough profit to yield enough tax to pay for the costs of government.
Confounded by the recovery, Balls is floundering badly. The Government should open up some more blue water, and cut the top rate back to 40p.