Ed Balls will on Friday say that a “hurricane is about to hit” Britain’s economy, in the most dramatic warning yet by a Labour politician that the coalition’s plans to cut the deficit risk pitching the country into a double-dip recession.
The Labour leadership contender and former ally of Gordon Brown claims George Osborne, chancellor, is a “growth denier”, who is ignoring signs of a global slowdown.
“What he is now doing is the equivalent of ripping out the foundations of the house just as the hurricane is about to hit,” the Treasury’s former chief economic adviser will say in a speech to the City.
Mr Balls’s speech will be seen as an attempt to stake out his credentials as a potential shadow chancellor, should his leadership bid end in failure; he lags far behind both David and Ed Miliband in terms of Labour party support.
Mr Balls will argue that Labour should stand outside the consensus and challenge the views of Mr Osborne, the Treasury and Mervyn King, Bank of England governor, that there is no alternative to fast and deep cuts.
“We have just experienced the biggest global financial crisis in a century, an event as momentous in historical and financial terms as war, famine or plague,” he will say.
According to Mr Balls, Labour should be inspired by Clement Attlee’s post-war Labour government, which put the creation of the NHS, the expansion of the welfare state and the reconstruction of Britain ahead of paying back its war debts.
The comments come as Whitehall’s spending watchdog issued a warning about the speed and scale of the coalition’s cuts programme.
In a report advising departments how to cut staff, the National Audit Office said that budget reductions of up to 40 per cent would usually mean “higher implementation costs and longer timescales”.
Meanwhile, figures from the CBI on Thursday suggested that the “hurricane” has yet to hit UK consumers. Retail sales in August grew at their quickest pace since the peak of the boom in early 2007.
Although large parts of the UK economy have shown signs of slowing in recent months, the UK still grew at its fastest pace in years in the second quarter and few economists are forecasting a “double-dip” recession.