Ed Balls has stepped in before David Cameron’s meeting with Barack Obama to say that many Americans are perplexed that the prime minister is ushering the UK towards the exit door of Europe.
Labour’s finance spokesman was in Washington on Thursday, shortly before Cameron was due to arrive at the White House, to launch a long-planned report on inclusive prosperity with the former US treasury secretary, Larry Summers.
The report, prepared with the help of the Washington thinktank the Centre for American Progress, represents a challenge to the claim by Cameron that his economic analysis is the same as the Democratic administration.
Cameron is hoping to use his two-day visit to underline his political alliance with Obama.
In particular, the Balls-Summers report challenges claims that a new economy in either the US or the UK built on greater income inequality and job insecurity is acceptable.
Speaking before the launch of the report, the shadow chancellor highlighted the European issue: “When I speak to people here in Washington, and in capitals round the world, people say, ‘Britain leaving Europe? A referendum in a couple of years’ time? Why is David Cameron proposing to take such big risks with Britain’s economic future?’ I think they’re right.”
He added: “The biggest risk for Britain in the next few years, the biggest economic risk, would be for us to leave the EU and we have a prime minister who at the moment is saying that it is on the table.
“In my view, sleepwalking to exit from Europe would mean we would lose investment, we would lose jobs, we would lose big companies going to other parts of the world to invest. And we would lose influence in Europe and in America too. I think we would pay a long-term cost.
“Our two biggest trading partners are Europe and America and it is vital that we continue to trade with both. But at the moment a Conservative government, if elected, after the general election would put at risk our relationship with Europe and our influence with America, by putting on the table our relationship with the European Union.
“I think we would lose investment, we would lose jobs and we would lose influence. It would be a very, very risky proposition. I don’t think David Cameron has got a grip on the European debate in his party, I think he is sleepwalking Britain to exit.”
The report with Summers looks at the causes of the world economic phenomenon of too little growth and rising inequality which has hit many developed economies in recent years.
It argues that although globalisation and rapid technological change have brought many benefits it has also created “an increasingly short-term outlook across our economies, and without new policies up to the task, working people – especially those on low and middle incomes – are losing out”.
“The fact is the delayed return to growth in the UK – after the recovery was choked off in 2010 – has not been accompanied by the sustained rise in living standards for most people which the Conservatives promised.”
Balls and Summers argue that the American economy is on a similar path of stagnating wages and high employment growth. They argue developed countries cannot succeed through a race to the bottom in which companies simply compete on costs as working people see their job security eroded and their living standards stagnate or decline.
The report argues: “Globalisation and technology have made these countries more productive but have also introduced competition from low-wage countries. These changes are also creating downward pressure on wages that is increasingly moving up the income scale in developed countries. In many countries, the changing relationship between employers and employees has also reduced the voice of workers – whether in the form of zero-hours contracts in the United Kingdom or the decline of labour unions in the United States.”
