It’s all very well for Ed Balls to announce that the next Labour government will be ‘ruthless and disciplined’ over public spending and will carry through a zero-based spending review to justify every pound spent.
Of course that’s right since nobody in their right mind can believe that the Tory spending cuts can be reversed just like that in an economy still being dragged down by prolonged recession. But that’s not the real point. The real question is, if Labour inherits a budget deficit as large as or even larger than today’s (which is quite likely), how would a new Labour government deal with it? Would it make further cuts a’ la Osborne, or would it adopt a wholly different strategy?
One of the great unspoken scandals of the post-2007 financial crash era is that no reform of the banking system has been put in place, though domestically the bank bail-out will cost UK taxpayers some £1.4 trillions by 2015 and globally the crash nearly collapsed the world economy. Despite those gigantic detriments, 5 years on next to nothing has been done. The Vickers Commission was set up, but failed to recommend the obvious remedy – splitting investment banking from the retail operations. Then the capital ratios proposed, inadequate as they were, were watered down after City lobbying, and then postponed to come into operation till 2019! Not only that, another source of great instability has been studiously ignored. 
Parliament was at its worst yesterday. The mud wrestlers Osborne and Balls were so dementedly determined to lay toxic blame on each other for the shocking LIBOR scandal that the City escaped with hardly a bruise to its name. The difference between a judge-led inquiry and a special parliamentary select committee inquiry is not that huge, but as at Ypres those few yards of terrain were fought over with such ferocity as though the next election depended on it. But one question hung over the assembled battleground, unanswered. Why were Osborne and co. so obsessively manic about blocking a judge-led inquiry? 
They’re being forced to yield inch by inch. First, Barclays’ chairman Agius said he had no intention of resigning; 24 hours later he’d gone. Then the shameless and disgraced chief executive Diamond announced that he was the best person to oversee a change in culture at the bank, having told us a few months ago that Barclays laid great store by being a ‘good citizen’ whilst, as we now know, presiding over the excesses of Barcap, the LIBOR rate-fixing scandal and the latest mis-selling scam. Another 24 hours, he was forced to walk the plank. 
It’s not often one agrees with the Institute of Directors (IoD), but on this occasion they are right (as far as it goes) to say: “It is high time for a clear-out of the leaders who created this mess, and the should be replaced with new blood”. From the IoD’s point of view no doubt this would be a good example of capitalism’s vaunted ‘creative destruction’ – getting rid of Bob (Greed Personified) Diamond and all the other arrogant and self-interested gamblers who have done so much damage to the public purse and to public confidence. But it’s not just some rotten apples who should be got rid of, it’s the financial system itself which has irretrievably broken down. There are several steps that should now urgently be taken.