Ed Balls says the economic argument has now swung his way after two years when few were listening to him
Ed Balls is clutching a mug of tea and looking distinctly pleased with himself. For several days MPs of all political persuasions have been patting him on the back. "Five hours 31," he declares instantly when asked his time in last Sunday's London marathon. Not an Olympic pace for sure, but Balls is thrilled none the less. He raised more than £63,000 for charity and ran on through the pain barrier.
Six MPs took part. Balls says he was the "oldest, the slowest and the bravest". "People have been really generous, although I am sure, actually, there were a few colleagues who probably hoped I would never reach the end," says the shadow chancellor.
The second reason for his bullish mood is cerebral rather than physical. After a bruising two years since the general election, during which Gordon Brown's former right-hand man has had to field endless questions about his role in creating "Labour's economic mess", he believes he has won a marathon economic argument.
In August 2010 Balls gave a doom-laden speech at Bloomberg's headquarters, warning that George Osborne's aggressive austerity plans were "a prescription for disaster". He was castigated for talking down the economy and even some in his own party thought he was tempting fate, but last week official figures showed that GDP had contracted for a second successive quarter, marking the first double-dip downturn since the 1970s. While he is careful not to be seen to be revelling in recession – "I hope it is already over" – it is a massive moment for him.
"I said it was incredibly risky when other countries were all doing the same thing, to have extreme austerity – that it was ripping out the foundations," he says. Balls now believes that a political turning point has been reached and that the public will finally start to give him and Labour an economic hearing.
He says that last month's budget – and the chain reaction of disastrous publicity that it triggered for Osborne over pasty taxes, granny taxes, charity taxes and the rest – has destroyed the Tories' claim to be competent, responsible stewards of the fragile economy.
"In a month, six years of David Cameron's attempts to detoxify the Tory brand have been irreparably damaged," he says. Osborne's 5p cut in the top rate of tax was "a massive strategic mistake", opening him up to the charge of helping the wealthy while hurting the less prosperous.
"I do think there are some people who could put up with unfair Tories if they were competent. An unfair budget which cuts taxes for the richest, puts them up for pensioners and families but which turns out to be a budget delivered while the economy is in recession – that is pretty shattering for many people who wanted to give these guys the benefit of the doubt."
Asked if he's surprised at what appears to be a loss of political touch by the chancellor, he says with barely disguised glee: "It's not normal for people to have such a crashing descent."
While Balls is on a high for now, staying on top of the argument will not be easy. He must shrug off the charge that he's a "deficit denier" and make the case that by choking off growth, the chancellor has made it harder, not easier, to tackle the UK's debt pile. "I want a credible deficit reduction plan, but I also know that unless that is a balanced plan and you have got action for jobs and growth, you don't achieve your deficit objectives."
He is sensitive too to the charge that his own "five-point plan" on jobs and growth – including a short-term VAT cut and tax breaks for firms hiring new workers – is not backed by a clear long-term Labour vision for the economy. "People also need to see what the economic vision is for 10 or 15 years' time as well," he concedes. "That is something which Ed [Miliband] and I have talked about, and which will be a very big challenge for us for the next two years."
He admits to having felt frustrated in opposition. But with events – and the polls – turning against the coalition, he sees a chance. "It is very frustrating in politics to be the answer to a question that people are not asking," he says. "But when people start asking the question you have got to be ready."
As for the next few years, his assessment is grim. "Interest rates are already very low and cannot be cut further. Despite credit easing, monthly bank lending to small businesses has now fallen every month since 2010. The fiscal squeeze gets worse. In those circumstances, where does the hope come from? Where does the optimism come from?"
As a former special adviser, Balls says he found last week's revelations about Jeremy Hunt's adviser, Adam Smith, keeping Rupert Murdoch's team apace with government thinking on a media takeover "totally and utterly staggering".
"It's like a high court judge, the day before he hears a case, ringing up the defendant to have a chat about how he's feeling and what he's thinking. It's clearly market sensitive and commercially sensitive information." Hunt's insistence it was Smith alone who was keeping the News Corp camp informed is, he says, "clearly nonsense".
Balls knows Labour must raise its game if it is to do more than just enjoy the coalition's misfortunes. Asked if the party has to be bolder, he hesitates, then says: "I feel that the Labour party on the ground has been much closer to that view than sometimes the Labour party at the centre."
Local branches have been swelled by new members, and grassroots activists have been banging on doors, but in Westminster he is less struck by the energy. "It is a big change going from government to opposition. Some people were tired," he says. Now, though, it is time to get in training for the long haul: "It is a marathon, not a sprint."