It was also the fault of governments and central banks –including Britain’s – who did not see the financial crisis coming and should have been tougher in regulating the banks. When the City and the Conservatives called for lighter regulation, we should have ignored them and been tougher still. Every Government in the world got that wrong - and I'd like to say sorry for the part that I and the last Labour government played in that. But if we got that wrong, I think we got our response to the recession right.
Here's the full text of Balls' Budget response broadcast, which was recorded at Coin Street Children’s Centre in Lambeth, South London:
"All around the country families, pensioners and businesses are facing tough times.
Over the last three years we’ve been through the biggest global financial crisis and world recession since the 1930s and it’s left us with a huge challenge to reduce the deficit.
The Conservatives want you to believe it was too much spending on schools, hospitals and police which caused the recession and the deficit, because they want an excuse to cut spending on those services now.
The reality is that, while Britain had low national debt, it was the irresponsible actions of banks all around the world that got us into that mess.
Every major country in the world faced that recession and as tax revenues plummeted they all ended up with big deficits.
But it was also the fault of governments and central banks –including Britain’s – who did not see the financial crisis coming and should have been tougher in regulating the banks.
When the City and the Conservatives called for lighter regulation, we should have ignored them and been tougher still.
Every Government in the world got that wrong - and I'd like to say sorry for the part that I and the last Labour government played in that.
But if we got that wrong, I think we got our response to the recession right.
Our priority was to keep people in jobs.
During the recessions of the 80s and 90s, unemployment rose above 3 million.
We were determined that wouldn’t happen again.
So even though tax revenues from the City collapsed, and the deficit was rising fast, we cut VAT and invested billions to keep people in jobs.
The alternative was just to do nothing and let unemployment rise.
And by last spring – after some really tough times – we were turning the corner.
The economy was growing, inflation was low and unemployment was steadily coming down.
There was still a long way to go, but we were getting back on the right track.
And because more people were in work, paying taxes and not receiving benefits, borrowing ended up £20 billion lower last year than forecast.
Under Labour’s plan, the economy was set to grow strongly this year too, and we were on track to halve the deficit in four years.
But everything’s now changed.
George Osborne ripped up our plan to halve the deficit and decided he would cut the deficit faster than any other major economy in the world – putting up VAT, cutting deep into frontline services, scrapping public and private sector jobs.
We all know how much his plan is hurting; the question is will it work?
Look at what’s happening now:
Our economy – which was growing – has now ground to a halt.
Prices ar e rising for everyone – threatening a rise in mortgage rates.
And unemployment - which was falling - is now rising – it’s now the highest level for 17 years.
But is it working to get the deficit down?
Actually, the Treasury’s borrowing was higher last month than a year ago when Labour was in charge.
That’s because there’s a vicious circle.
If the economy isn’t growing and hundreds of thousands of people are losing their jobs, then fewer people pay tax and more people claim benefits making it harder to get the deficit down.
By cutting too far and too fast, George Osborne isn’t solving the problem - he’s in danger of making it worse.
So what we needed in yesterday’s Budget was a plan: to help hard-pressed families facing the squeeze, to get people back in to work and get our economy growing again.
On these tests, the Budget failed.
George Osborne promised a £48 tax cut next year - but he didn’ t tell you that pensioners won’t get it.
And he didn’t tell you that the increase in VAT will cost a family with children an extra £450 this year.
He cut a penny off petrol duty. But he didn’t mention that his VAT rise is adding 3 pence a litre.
He didn't tell you that while he’s cutting taxes for the banks this year, his cuts mean fewer police on the beat, longer NHS waiting times, and - in some places - the closure of Sure Start children’s centres like this one where I am today.
He claimed he had a plan for growth, but the government’s independent watchdog said actually the economy will grow more slowly this year and next and unemployment will be higher every year. That’s why he’s having to borrow £45 billion more.
So I fear that George Osborne’s plan won’t just hurt, it won’t work.
I think there is a better way.
In America, they’re also got a huge deficit, but they’re cutting it at a much steadier p ace.
Their economy is now growing strongly and unemployment is falling.
In Britain, we do have to make tough choices to get the deficit down – that does means some fair tax rises and spending cuts.
But George Osborne is going too far and too fast, and we’re paying the price in lost jobs and slower growth.
That’s why we said he should repeat the bank bonus tax this year, and use the money raised to build more affordable homes, get more jobs for young people and help strengthen our economy for the future.
That’s the right and fair thing to do, but George Osborne isn’t listening.
He just doesn’t seem to get it.
He doesn't get how hard people are being hit by higher VAT and cuts in local services.
And he doesn't get what it means to face the fear or reality of unemployment.
For the sake of our country’s future, he needs to think again and start putting jobs and growth first – and he needs to do it now.