DM: Why do you think you’ve lost your poll lead? Anything to do with your leader’s speech at the party conference where he forgot a number of things?
EB: These polls go up and down week to week, at the end of our conference we were ahead and at the Tory conference they’re ahead. There’s only one poll which matters and that is a general election in seven months’ time and I think we are going to go on and win the election because we’ve got the policies and the vision and also we are on the side of working people and I think after the last week I don’t think people think David Cameron and George Osborne are.
DM: OK, but what do you think of your leader’s speech, on a scale of one to ten what would you give it?
EB: I think it was a good speech.
DM: But what would you give it though, one to ten?
EB: I’m not going to give a rating to my leader’s speech!
DM: So not to ten?
EB: Ten out of ten of course, he is my leader. But he’s got to show, as he said in his speech, he’s got to show himself and the policies of the next Labour government and he’s got seven months to do that and we’re going to be there week after week. When it comes to the TV debates he’ll be right up there head to head with David Cameron. I think people know David Cameron, the Prime Minister, for all his faults, with Ed Miliband they are still getting to know him but I think by the time we come to a general election day we are going to win that argument.
DM: Did you have any input into the speech? As Shadow Chancellor, the fact that he forgot to mention the deficit, did you read the speech beforehand?
EB: In the old days of Tony Blair and Gordon Brown years ago, I don’t think they saw each other’s speeches until the night before …
DM: So you didn’t see it?
EB: I saw Ed’s speech two weeks before and he saw mine a week before, I’m afraid I was slightly behind in writing mine than his, so we swapped our speeches. Ed had a strong passage in there about deficit reduction and of course it was almost all of my speech the day before. Ed said in his speech on that Tuesday our clear pledge for the National Health Service, 20,000 nurses, 8,000 GPs, it’s all paid for by the mansion tax and tackling tax avoidance. He said we are not going to have borrowing to pay for that tax promise so it was all in there in the speech.
DM: But what did you say to him afterwards? OK, we know you like the speech, did you say well done leader but you forgot to mention the deficit?
EB: As Ed said, it was a big feat of memory and there was a paragraph he didn’t say and he said to me afterwards it was a mistake and it was but, look, that kind of thing happens sometimes in politics. Did people have any doubt out of our conference that we’re saying we’ve got a clear programme for government, all costed, all paid for, as I said no spending plans requiring more borrowing, no spending plans that are not costed and paid for. What a contrast to what we had from David Cameron this week, I’m sure we’ll come onto that.
DM: We will, but let’s put that to the test, all costed, all paid for because there are so many questions, particularly about this mansion tax. It is all costed, you have worked it all out so you must have the answer to all these questions then. Is it a 1 per cent flat rate above two million pounds? Is that the way it will operate?
EB: What we’ve said is we are going to use the government’s model which they introduced two years ago in 2013 which is called the Enveloped Properties Annual Tax. They currently apply that tax to properties which companies own over two million pounds. The government has bands say from two million to five million, five to ten and they levy a charge within that band. We would have different bands, it will be fair, it will be progressive, it will be proportionate. What we’ve not yet done is set out the detail of how we can do this …
DM: How have you costed it then if you have not set out the detail? You have said how much you will raise from it, therefore you have to know these details or else you just come up with a back of the envelope figure.
EB: Well you are going to be interviewing in half an hour Danny Alexander, the Chief Secretary. He said in a speech a few months ago that the Treasury have done detailed analysis, because they have figures which we don’t have. Danny says that the Liberal Democrats can raise £1.2 [billion] to £1.5 [billion] for a tax over £2 million. We’ve said we believe £1.2 billion at the bottom end of that range is the right thing for us to aim for.
DM: But you’d have to look at the details.
EB: Of course we will but we will do it in a fair way, it will be lower for people on properties just above two million, of course it will be higher as a proportion for the most high value properties.
DM: So it will be more than 1 per cent for the higher value properties or even more because …
EB: Well you said 1 per cent, I’ve not said it will be 1 per cent. I’ve said what we’ll have is a series of bands and we will apply a charge within those bands, it will start at two million, it will be uprated by house price inflation, it will be more than proportionate so the largest houses, over ten, twenty million pounds, will pay proportionately more and houses down at two million and just above proportionately less. It will be sensitive to the fact that there will be some people who might have a very big house and low income and we will have rules which will allow them not to have to pay the annual charge.
DM: What are those rules?
EB: Well one way to do this is to allow people below a certain income level, which we’ll have to discuss and set, to say we will roll that money up …
DM: Would you roll the interest over as well?
EB: Yes and pay that off on …
DM: So you get it out of their estate?
EB: Or if they choose to sell the house.
DM: OK, so tell me about the valuation process then, how is that going to work? It is particularly sensitive around the two million mark.
EB: What we will do is use the same process that the government is doing around the Envelope Tax which is that you allow people to self-value but they will be able to pre-credit, to pre-approve with the HMRC. If the band is wide and you are right in the middle, it is clear that that’s what your property is worth, you are in that band and you will just declare that as your value. But people who want to will be able to go to HMRC and say I’m around the border, this is my valuation and HMRC will approve. Of course people will choose if they want to and …
DM: What happens if HMRC disagree? Do they have to go round your house and value your house themselves?
EB: Look, it is a very normal thing if people are moving house or if they are getting a new mortgage to get a survey of the value done. I think many people around the value might choose to have a valuation done in order to show HMRC that they are below the level and I am sure HMRC would take a valuation as it stands.
DM: So you have got to pay two or three hundred quid for a survey?
EB: I think people who choose to will be around the transition level, whether that is two million or five million or ten million, can do so, we will have pre-approval from HMRC.
DM: What about this link to house price inflation? Of course we know it’s regional, in some regions house prices go up and they go up very fast and in some regions they fall, is it the national measure you will use?
EB: That’s our plan, to use not price inflation but …
DM: Well that’s not fair is it?
EB: Not fair on who?
DM: Not fair if you are in a region where house prices have dropped and your two million pound house is suddenly worth £1.8.
EB: I think the vast majority of people in London and across the country own houses which are well short of the two million threshold. We are talking about the highest value properties which even in parts of central London are a very small minority of the overall number of house sales and I think it is fair to say that that should not go up by price inflation but by house price inflation. We are not seeking to draw more and more people into the mansion tax net but we do think that it is fair to use the UK wide measure because if you’ve got, look if you’ve got people coming from abroad pushing up house prices in central London and paying almost no tax, disproportionately a hugely low amount and in the end the contrast is this – you’ve got a Labour government which says we’ll have a tax on the highest value properties to invest in the National Health Service and a Tory government which is taxing the bedrooms of disabled people on low incomes because they say that’s fair. That’s quite a big difference isn’t it?
DM: A serious question on this, would the Queen have to pay it?
EB: What we’ve said is we’ll use the same rules that the government has for the Envelope Dwellings Tax so therefore people who have properties which are open to the public, a National Trust property which is open to the public, will have rules which allow them to be exempted but people who own large houses which are above two million pounds and aren’t open to the public, will pay it and if…
DM: So the Queen will have to pay it?
EB: The Royal Family pays tax like everybody else and rightly so.
DM: So the Queen will pay the Mansion Tax under Labour rules and therefore Prince William will have to pay it as well, he’s getting a new house on the Sandringham Estate. Just to be very clear here, you have talked about the broadest shoulders, they are pretty rich, they will pay the Mansion Tax?
EB: George Osborne and I have sat down to discuss the issue of royal finances in this parliament. There has always been a cross-party consensus, we have fair and tough rules for the financing of the royal household but members of the royal household pay taxes just like everybody else and rightly so.
DM: So those houses that they own that are not open to the public, they will pay the Mansion Tax but only if they are above two million pounds?
EB: There aren’t different rules for anybody, it’s the nature of our society and rightly so.
DM: OK, that’s very clear Mr Balls. Let me ask you about some of the measures that were announced that were very specific, what do you think about raising the tax threshold to £12,500? Is that something Labour would match or say that’s not going to happen with us?
EB: Look, the fact is it’s pie in the sky. David Cameron seems to have cut the rug from under him when it comes to making costed commitments. I said at our conference that everything which we announce will be paid for and clearly shown. David Cameron and George Osborne before the last election said, if it’s not paid for and financed, it’s not a tax cut it’s a tax con. David Cameron now says he is going to give £7.2 billion of tax cuts at an unspecified date, unclear where it is coming from, it’s a big black hole. What we also know is that he will be better off when that comes through and a family on the minimum wage will be worse off because what George Osborne announced the day before, the Strivers’ Tax, the freeze on tax credits which hit three million working people, that will more than outweigh David Cameron’s personal allowance change. So it is uncosted, it’s a black hole, it is a very, very dodgy way to do economics.
DM: So you have costed your 10 per cent rate you tell us, so that comes in at that point at the current threshold, £10,500 or what will be the current threshold. Where does it extend to, how far does it go?
EB: We’ve said we’ll introduce a 10p starting rate; we’ll do that as soon as we can in the next parliament, we will …
DM: How big is the band?
EB: We will pay for that using the Married Couples Allowance which the government has introduced and doesn’t go to people who are widowed or divorced, that’s a start. If could do more, if I could do more …
DM: But it is basic economics, you can’t know how much it costs unless you know how wide the band is.
EB: I’ve not set a band for the 10p; I have said I will use the money from the Married Couples Allowance ….
DM: So it will be very narrow.
EB: Well it will start off narrow but I’d like to make it bigger but the difference between me and David Cameron is he announces with a conference fanfare an unfunded tax cut which he can’t pay for and which is unfair because it disproportionately helps people on higher incomes. I say to you I’d like to do more but I am going to start with a 10p tax cut only paid for by the Married Couples Allowance and it’s fair because it helps working people. That’s the difference between the parties, we are now the only parties – the Lib Dems are doing it today with National Insurance – there is only one serious party which says we will not make unfunded promises we can’t show how we’ll pay for and that’s Labour, not the Tories or the Liberal Democrats, they’re trying to spray money left, right and centre.
DM: So what do you think about what John Prescott, the former Deputy Prime Minister, has been writing today? I’ll put my specs on to read it, writing in his column in the Mirror today, having heard everything you’ve said there Shadow Chancellor, he says Labour’s approach is far too timid. “I fear Shadow Cabinet Ministers are not delivering new policies because Ed Balls won’t approve them if they involve spending commitments”.
EB: As I just said, we’re not going to make any spending commitments where we can’t show how we can pay for them. Look, John Prescott is a fighter….
DM: He also asks what planet is your party on after Ed Miliband’s speech.
EB: John Prescott is a fighter, sometimes literally but he is also a political fighter and we have got a hell of a fight on our hands to save our National Health Service, to stop the Strivers’ Tax and deliver our country from a Conservative Party which will take us out of the European Union. John is clear in his article that we should learn from 1997 and I agree …
DM: He says you should become a one nation party again and not go for your core vote?
EB: John says he wants clear policies which will make a difference, minimum wage to £8 and a mansion tax to help get 20,000 nurses in the NHS, a 10p starting rate of tax, an energy price free, a business investment bank – clear policies but the lesson we learned from 1997 when John and I worked together is if you as a party come along, as happened in previous elections for us before ’97 with promises which couldn’t be paid for, then you get into trouble. Everything in ’97 was costed and paid for, everything in 2015 costed and paid for, no spending requiring more borrowing. The people who making unfunded commitments are now the Tories and the Liberal Democrats.
DM: So the last question on that pledge from Mr Cameron to raise the threshold at which people start paying the 40 rate, that’s not going to happen under Labour anyway is it? That definitely is out, that’s unfunded?
EB: I would like to take more people out of the 40p rate. I said in my conference speech, I said to people this is who I am, I would rather taxes were lower rather than higher but in the end you have got to make choices and our choice is very different from the Tories.
DM: Would you index it? I mean the threshold will stay still, it’s fiscal drag isn’t it dragging people into it?
EB: The index in law, it’s called the Rooker Wise Amendment, it was introduced in the 1970s, it is indexed to inflation. Of course we should carry on with indexation and if we could go further – but what is the difference? George Osborne has said he will keep a tax cut for people earning over £150,000, a three billion pound tax cut to the richest while he is going to make working people pay three billion more through the freeze on tax credits. It’s really interesting, 250,000 people in Tory marginal constituencies in work have seen their tax credits frozen, that’s the difference in the choice. I would like to do more for everybody but my first priority will be people in work who have seen their living standards down by £1600 [a year]. What’s George Osborne’s first priority? The people at the top earning over £150,000. That’s the election choice.