[A-List] UK state: inside the Treasury

["Michael Keaney" <michael.keaney@xxxxxx>]

Brains at the heart of Brownland

Jackie Ashley meets Ed Balls, chief economic adviser to the Treasury

Monday November 4, 2002
The Guardian

He is one of the half-dozen most important political players in the country
and by far the least known. Ed Balls is routinely spoken of as a future
chancellor, a man in cabinets to come; he is Gordon Brown's closest aide and
fixer, the intellectual in service to the most intellectual minister of all.

As chief economic adviser to the Treasury, he is at the centre of the most
important decisions of the months and years to come - on the limits of
privatisation, the euro referendum, and taxes. In spectacles and white
shirt, clean-cut and affable, with a monster-sized intellect, he reminds me
of Brains from Thunderbirds.

The new Treasury, refurbished with open atriums and sparkling white walls on
which hang the latest in modern art, is a suitable setting for Brains. Dark
blue and pink are much in evidence: we're at the centre of a
forward-looking, hi-tech, modern economy is the message. Even the entrance
has been moved. It no longer looks out over Whitehall, along with so many
other departments. Now the Treasury has - quite literally - turned its back
on that most traditional establishment street, and looks towards St James'
Park instead, as if declaring its own independence.

Self-confident

In the geography of New Labour, this is Brownland and Ed Balls is its
supremely self-confident star. No 10 might witter about the euro referendum
and encourage ever more radical flirtations with the private sector, but
Brownland thinks differently. Here, the delay over the ditching of sterling
was planned. Here, the rush to independent hospitals, borrowing outside the
public sector, was stopped. And when I meet Balls, in his office two doors
down from Gordon Brown, he has a stark and provocative message for some of
his colleagues in government.

With deteriorating relations between the government and the unions over the
involvement of the private sector, and a rampant love affair with market
principles in full swing in No 10, Balls wants to draw a line in the sand.

He believes the government has pushed the private sector as far as it can in
the public services, and now it's time to stop: "We have to have the
confidence to accept that there is a limit to how far you can apply market
principles." Any further pushing of them would, he believes, endanger the
public sector ethos itself: "The NHS and our public services depend upon an
ethic of public service and a commitment to the services. In an area like
health or education, if you go down that marketising route, you run grave
risks with that ethic of public service."

It is a rebuke, and meant as a rebuke. This all broke surface during the
Labour conference, when Alan Milburn, the ultra-Blairite health secretary,
came into semi-public confrontation with Gordon Brown, over foundation
hospitals. The issue might have seemed arcane - would they be allowed to
borrow off balance sheet? But in fact it went to the heart of the
philosophical argument raging inside the government.

On the one hand, there are the ultra-modernisers, prepared to see the old
central state provision virtually disbanded, in favour of much more
independence and variety - rather as the Tories want. On the other, the
"Real Labour" enthusiasts from the Brown faction who want to modernise the
post-1945 welfare state in order to save it.

When Tony Blair made his radical conference speech, it was spun as the new
thinking of a radical devolver and localist, leaving Brown far behind as a
stuck-in-the-mud centralist. This angered the Treasury, who see it not as an
argument between central and local, but between public service and private
service. Now they are hitting back.

Just as the painters and decorators have transformed the Treasury's concrete
image, so Balls is determined to transform its political reputation. For the
last 150 years, he says, "the Treasury has had a reputation for being
secretive, short-termist, controlling, centralising".

Yes, and particularly so during the last five years, I add - for certainly
according to other departmental ministers, the Treasury runs a command and
control unit, with its tentacles stretching everywhere. But Balls is
infuriated by that view and insists it's simply not accurate: "I don't think
it's fair to say that we are centralising at all, in fact I think the
opposite has been true." The Treasury had been giving up day to day power.
But localism wasn't deregulation, it was about allowing creativity and
innovation, giving primary health care trusts three-year budgets and letting
them get on with it.

"It's not about marketisation or privatisation - those economies which have
gone down the road of trying to treat health like a local privatised or
marketised commodity have run into terrible problems both of inefficiency,
huge escalating costs - but also unfairness."

So had the government now gone as far as possible down that route? Yes, he
said. In the NHS, the private finance initiative attempted better relations
with the private sector, "but if you go down the road of thinking you can
apply market principles to a good like health, the evidence is that you end
up with inefficiency and escalating costs, two-tierism, and you can do grave
damage to that ethic of public service". Was the same true in schooling? "I
think the same is true for education."

The most extreme market thinking is going on, unsurprisingly, in the Tory
party, but it is an open secret that modernisers inside the government would
like to push far further, too. They do so, it seems, at the risk of a
confrontation with Gordon Brown.

We move on to the euro but after a long period of verbal ritual dancing, I
can only report that he was impeccably dull and wholly predictable. He does
know and he isn't saying. We heard a lot of "discipline and rigour", which
is the Treasury's way of saying "have a nice day".

Perhaps there is no conversational way of talking about the economy, but
Balls, like Gordon Brown himself, seems to lapse worryingly easily into
Treasury speak - he's all "prudence", "credibility", "long-termism", and
"rigour", even "marketisation" - combined with some fairly unnatural
sentence rhythms. He was famously mocked for putting "neo-classical
endogenous growth theory" into a Brown speech, causing Michael Heseltine to
quip: "It's not Brown's, it's Balls."

It's all the years writing leaders at the Financial Times, his stint at
Harvard, the endless international economics circuits. For a boffin, it's
absolutely fine. But if this is really a man on the upward curve, a
politician with a future rather than a behind-the-scenes Brains, he will
soon have to start speaking like the rest of the human race.

Well, he is a member of it. He's married to Yvette Cooper, a former economic
journalists like himself who is a minister in the Lord Chancellor's
Department and they have two small children. The chancellor is known to have
a huge appetite for work and to demand equal commitment from his aides.
Cooper's job is no soft option either - so how do they manage? He admits it
can be "quite tough", but doesn't think they are particularly unusual: "The
kind of lives we lead, it's a bit mad and a bit hand to mouth, but it's not
so different from the kinds of lives which lots and lots of couples lead
with small children, when both of them are working."

Sometimes, of course, things can go badly wrong. The recent storms had put
the trains out and almost left them stranded up north. There are also upsets
of his own making: he somewhat shamefacedly admits that he's only just
"learned the reality of half-term" - the hard way.

He had taken his daughter, who's just started school, into school last
Monday. "We arrived and it all looked a bit quiet, and we rattled the gates
and somebody came out and said, can I help? I said, 'we've come to school'
and he said, 'it's half-term'." He tells the story with cheery
self-deprecation, though wonders afterwards whether he's been wise to own up
to his ignorance: this is a man who, like his boss the chancellor, weighs up
the consequences of every word he utters.

But he also admits that although he's a very "hands on" dad, he does
sometimes try to escape to football on a Saturday, "though I tend these days
to feel guilty about that, and Yvette does a pretty good job of making me
feel even guiltier".

It has been suggested that Balls would like to enter parliament himself. His
name was mentioned in connection with Normanton at the last election - the
neighbouring seat to Cooper's, which would be convenient. In the event, the
sitting MP, Bill O'Brien, did not stand down, but what about next time
round? "At the moment we've got a slightly difficult global economy, we've
got the pre-budget report, the green paper on pensions, the five tests and
public service delivery at a time when we've got a tax increase, so at the
moment we've got quite a lot on."

That wasn't exactly a "no" - what about at the next election? "There's lots
of other things to take into account, like whether other people want you."
Well, if they wanted you, would you want them? Balls launches into a long
and slightly worthy speech about how he's always wanted to be in public
service and how lucky he's been to have had the chance he's had over the
last five years.

So that's a "yes" then? "I think probably I just didn't answer the
question," he says, laughing. I'll take that as a "yes". The Blairites
haven't got the future sewn up, quite yet.

The CV

Ed Balls

Born February 25 1967, Norwich. Married to lord chancellor's department
minister Yvette Cooper, two children

Education Nottingham High School; Oxford University; Harvard University

Career history · Economic leader writer and columnist, Financial Times,
1990-94
· Economic adviser to shadow chancellor, Gordon Brown, 1994-97
· Chief economic adviser to the Treasury, 1997-99

High Coming up with the blueprint for the independent Bank of England

Low Writing the snappy catchphrase "neo-classical endogenous growth theory"
for a speech given by Gordon Brown, which led Michael Heseltine to quip: "So
there we have it. It's not Brown's... it's Balls"