Ed Balls, the shadow chancellor. Photograph: Stefan Rousseau/PASix months ago Ed Balls was basking in the political limelight. Labour's combative shadow chancellor had correctly predicted that the coalition's aggressive austerity policies would kibosh the economic recovery, with GDP contracting in two of the past four quarters. And George Osborne's cack-handed pasty tax budget had knocked some of the shine off the chancellor's reputation as a master strategist.
Yet after Thursday's news that the economy expanded by a relatively healthy 0.6% in the second quarter of this year, it became clearer than ever that barring an outright economic catastrophe, Balls's argument that spending cuts had choked off growth was never going to be an election-winning strategy in itself. He may be right that UK plc would be in a better state had the cuts been more gradual, but as one former Labour insider put it, "counterfactuals don't cut it in politics".
So with less than two years to go before the next election, Labour is in urgent need of a coherent political message for a time of growth. Balls's argument that the recovery has yet to be felt in most households will continue to resonate for some time, with wages still growing more slowly than inflation and the 1% cap on benefits set to eat into the living standards of some of the poorest over the next couple of years.
Yet voters need not be basking in the fruits of growth themselves to feel more positive about the state of the economy. They just need to feel that the future is likely to be better than the past. And the Tories are on a concerted charm offensive to show that we're all in it together. Osborne spent the wee hours of Thursday visiting night-shift workers in the Midlands, posing for awkward shots on forklift trucks and next to bread production lines.
Balls, meanwhile, was preparing for a love-in with Larry Summers, the Harvard intellectual and Clinton-era US treasury secretary closely associated in the American public's mind with the bonanza of banking deregulation that ultimately led to the sub-prime crisis, as damningly laid out in the film Inside Job.
Within moments of the GDP figures being published, the Treasury had fired off a statement in which Osborne said that "unlike the unbalanced economy before the crisis, we are going to make sure that everyone benefits from this recovery".
And that gets to the crux of Labour's problem: while many economists believe that the nascent recovery has the potential to be just as unbalanced, unsustainable and out-of-kilter as the pre-crash growth of 2000-07, it's hard for the opposition to say so openly when they oversaw the last boom.
Help to Buy, Osborne's attempt to reflate the housing market, announced in this year's budget, has been slammed by the International Monetary Fund, the OECD and the former governor of the Bank of England. But Labour's frontbench have been uncharacteristically silent.
Their reticence is hardly surprising. Corrosive and damaging as a new housing bubble may be to social cohesion and economic stability, more than 60% of households are owner-occupiers, and many will regard the reappearance of a forest of "Sold" boards in their neighbourhood as an unambiguously good thing.
Not only that, but both Balls and Ed Miliband were intimately involved with the Blair and Brown governments which, having subcontracted monetary policy to the Bank of England, were blind to the dangers of rocketing property prices and reckless lending.
"Labour's in a very difficult place to talk about what is obviously another asset bubble," said Neal Lawson, of the leftwing campaign group Compass. He said part of the party's problem in preparing its plan of attack for 2015 was that it never had the fundamental debate in the wake of its electoral defeat five years ago about what kind of Britain it wanted to create.
"We should be asking, 'is growth the only thing we care about?' That takes you into a conversation about inequality, about a different kind of political economy that isn't based on the City, that isn't based on assets, and that isn't just based in London."
Some of that thinking has been going on as part of Miliband's policy review, a smorgasbord of more than 20 separate research projects, run by shadow cabinet members, with titles as diverse as Empowering Communities to Improve Transport, and Children, Food and Obesity. Miliband has made a series of thoughtful speeches on subjects such as the future of capitalism.
But so far these musings have translated into few concrete policies, aside from a mansion tax on the most valuable homes and a promise of £10bn worth of extra infrastructure investment.
Meanwhile, Labour's rhetoric is shrewdly picked up and amplified by the coalition. Miliband talks of "predatory capitalism", then David Cameron warns Starbucks to "wake up and smell the coffee" and makes cracking down on tax avoidance the centrepiece of his G8 presidency. Labour calls for a British investment bank, then Vince Cable announces that he will set one up. It may be smaller and less powerful than the opposition's blueprint, but voters are hardly likely to notice the nuances.
Similarly, Miliband's notion of "pre-distribution" remains a vague and woolly aim, while David Cameron happily embraces the notion of a living wage and promises to "build a recovery for hard-working people".
Labour's recent decision to match the Tories' spending plans for the first year of the next parliament may have been a shrewd political tactic; but it makes the task of differentiating themselves from the government even tougher. They need to show how they will build a fairer tax system; a banking sector that serves society; enough homes to put the housing market on an even keel; and, most importantly, an economy that delivers more and better jobs.
Balls may have put himself on the right side of the intellectual argument, but in 2015 he will face the electorate, not an Oxbridge tutorial. Labour will need to do more than empathise with the families that cannot afford a home or are struggling to make ends meet as a result of the sickly recovery and the government's regressive policies. It will need concrete proposals of its own – and some solid reasons for voters to feel optimistic about the future.
