Something has struck with me with force watching the Labour leadership debate.
No one wants to talk about the cuts.
Well, Ed Balls threw out some frankly rather silly remark about the new Chancellor enjoying having to cut things, but aside from that, no one wants to talk about the cuts.
Yet, obviously, the cuts are central.
They are central in two ways.
The first is that they will be the story dominating politics over at least the next two years and probably longer. Labour is going to have to decide how to position itself.
And being the party – defining Labour as the party – of spending won’t work, just as reducing the Tory party to being a party that only talked about tax didn’t work.
There is something else.
The cuts will be central because new Labour’s fiscal policy was a disaster.
Gordon Brown and Tony Blair realised that there would be resistance to tax rises so they were nervous about raising them. But they weren’t similarly reluctant to raise spending.
A tax and spend party that doesn’t raise taxes to pay for the spending ends with a borrowing crisis.
So Labour cannot repeat the Brown-Blair policy. It needs a new one. And not one of the candidates has given us a clue what that might be.
Is silence an option? Hardly.
Now, the new leader, whoever that is, might try and hunker down, opposing the Tory cuts, while fudging the alternative. But I think they will find that more difficult than the last decade suggests it would be.
Tax and spend plays differently for governments and opposition. The press uses government policy as the baseline and the looks at how the other party would move from it.
That means that in opposition the Tories were the party of cuts, and now, in opposition, Labour might be seen as the party of tax rises.
And Labour knows how that plays out.
Daniel Finkelstein is Chief Leader Writer of the Times. He blogs at Comment Central
Tags: cuts, Daniel Finkelstein, Labour
Nice try, Fink, but off beam as ever.
First, Labour will argue that the deficit is casued by QE and the bankers, not its own spending in government. It’s a plausible case, although obviously not one who takes Murdoch’s shilling can argue if they don’t want to join the dole queue.
Second, the coalition is about to increase taxes (I presume you read the front page of the Daily Wail). Fortunately, this is a win-win for you because either it can bring them down again before the election or else it can blame Labour for its inability to do so. And if it should be tardy you can always remind them, eh?
Mike. Blaming the bankers for the deficit isn’t plausible because we were overspending before the crisis. The budget hasn’t been in balance since 2002. The deficits in 2003, 2004, 2005, 2006 and 2007 were not the fault of the bankers.
Quite how Quantative Easing could be blamed to the deficit in anyway is beyond me as that was printing money to buy government bonds. It entailed no extra spending what so ever.
Devon, you clearly start from the assumption – one I should have challenged in my earlier post, of course – that governments shouldn’t run deficits. But they usually do and the sun continues to rise in the morning. I’ll make a prediction – the coalition will discover that it can in fact live with a greater deficit than it presently thinks prudent. For every deficit there is a surplus somewhere. You may want to say that because I have my life savings in gilts rather than equities I am somehow damaging the economy, but that is a horse of a different colour altogether.
Oh, and QE wasn’t “printing money to buy government bonds”. It was exactly the reverse.
Labour should openly and unashamedly say that the deficit needs to be reduced but (a) more slowly and gradually than is planned by the coalition and (b) economic growth should play a major role in reducing it but savage cuts will only reduce growth. We should not accept the “there is no alternative” line that the level of cuts proposed but the coalition is the only resonsible course. As for Labour’s record, we should point out that until 2008 the Tories were committed to continuing Labour’s spending plans – it was the financial crisis which changed the picture.
As the cuts bite public opinion will incline to the view that “the deficit is big enough to look after itself” and that saving a pound from identified public services is better than cutting another pound from the deficit. The main danger for Labour is in not being able to tap into this sentiment if we are not clearly enough saying that there is an alternative.
Dear Mike Killingworth,
“The problem with socialism is that eventually you run out of other people’s money” (Margaret Thatcher, 1976) and Labour always leave office with more people out of work than when they arrived.
Gordon Brown’s reputation for “prudence” was based upon his adherence to Kenneth Clarke’s guidelines before ’02 and then his own version of the “golden rule”, namely, that the Government will borrow only to invest and not to fund current spending over the course of an economic cycle.
In practice, Brown was able to dodge accusations that he failed to meet his own criteria by frequently categorising current expenditure as investment, as well as the use of off balance sheet shenanigans like PFI, the interest on which is … expenditure.
Regrettably, Brown concurrently allowed the money supply to spiral out of control, leading to the exact thing which he claimed to have abolished: boom and bust. He also created a quango which in current speak was “not fit for purpose”, the FSA, to regulate the banks, while neglecting bank supervision.
No sane person believes that Brown caused the crash any more than his claims that the crash was an American disease which we caught. The fact is, it happened on his watch, and its consequences for the UK are far worse as a direct result of his incompetence. Even his claim to have “saved the world … er, I mean saved the banks” has merely transformed the UK banking crisis into the UK sovereign debt crisis.
The significance of DevonChap’s point about deficits and yours about the sun coming up is this: the sun will still come up even if the UK defaults, but with it will come a toxic combination of punitive inflation and interest rates, depression, civil unrest, the state being unable to pay its employees etc.. The only way to avoid a default is to reduce the deficit.
Cutting the deficit “too soon” may or may not result in a double dip. Delaying cutting the deficit may result in the UK’s creditors requiring higher interest rates to offset the greater financial risk and the absence of (Labour’s) political will to tackle it. Or worse.
All of which leaves Labour in a bind. Regardless of who won the last election, these were always going to be Labour cuts: no amount of scaremongering about the Tories can change that fact, nor the growing realisation that Brown was the worst Chancellor since the invention of money, possibly excepting Dennis Healey.
It took eighteen years for the country to forget Healey and elect New Labour, so it’s hardly a surprise that none of the candidates for the leadership are mentioning the deficit: there is no point.
Labour are correct to keep quiet for now. Any opposition by Labour will simply be used as an opportunity to blame Gordon Brown (the right’s favourite bogeyman) for everything that is being cut. Liam Byrne’s little joke will be trotted out at every opportunity too.
Labour should bide its time & see what the impact is for jobs, the economy & the deficit itself. Do not over-look the possibility of cuts causing a downward spiral in tax revenues that makes cutting the deficit incrementally harder. If the cuts don’t achieve their objective of reducing the deficit, Labour will be in a much better position to attack. And that attack will have much more impact if it cannot be dismissed as ongoing sniping. Labour should save its voice for when we have something new to say & people are ready to listen. 😎
Dear AmberStar,
“Labour are correct to keep quiet …” Agreed.
“Gordon Brown (the right’s favourite bogeyman) …” He is the country’s bogeyman, but above all he should be Labour’s – he has condemned the party to political oblivion. The Tories have moved into the centre and the Liberal Democrats are riding point on their left. No doubt the ConDems will have their problems both political and economic, but they also have one key advantage: they didn’t get us in to this mess – New Labour did.
Isn’t Liam Byrne’s “little joke” funny? Perhaps you imagine that the sick, the elderly and the vulnerable – not to mention the Mrs Duffys – will console themselves with a wry chortle as their cancer treatment, home visits and social services are cut because “there is no money”. Or, perhaps they will say: “[At least] Labour will be in a much better position to attack.”
The point about past deficits is misleading. Prior to 2008, the deficit was a small percentage of GDP and indefinitely sustainable. What happened after the credit crunch is that tax revenues collapsed, leaving the deficit to widen to a level which cannot be sustained indefinitely. However sustaining it for the short term was absolutely necessary to prevent the recession from getting worse. There is no shame in defending our record on this.
Going forward we have to recognise that two long cycles are over. Neo-liberal economics has collapsed and the coalition government is swimming against the tide: their small-state market-knows-best model no longer has an ideological base which the public accept, and we have to exploit that.
The other cycle that is over is lowering taxation. Foreover lowering the headline rate of income tax is a policy that no longer has any purchase (pun unfortunately intended), as Gordon Brown has found: we got no thanks at all for lowering the standard rate to 20p. Taxes will have to go up, and the coalitition will find this out and also do it. Just as in a conflict it usually takes the most hardline war-mongering factions to finally make the peace, it is going to be the Conservative party that puts up taxes. (Which taxes it will be is not clear yet.) The political impact of this will be that increasing taxation won’t be a purely Labour party sin, if it ever was. We should be arguing about *which* taxes go up and the relative impact of different options, *when* it happens.
Dr Pangloss,
You miss the point, that there is a case to be made by Labour – and a good one at that supported by a large number of economists and comparison with the response to the economic crisis in countries such as Ireland – that their response to the crisis was the correct one and saved the country from complete catastrophy (cash machines on the brink of closing?). Labour candidates will have no choice but to mention the deficit or cuts – it will be at the heart of debate and public consciousness for the next 5 years.
Whoever the new leader is will have to convice first the Party faithful and then the country that they have a clear and coherant – and stong – argument for defending Labour’s record in office and particularly on the economy. The coalition will quite obviously attempt to put every difficult decision they make into a context of ‘Labour failed – we’re just clearing up the mess’; it will not be enough for the leader or the Party to keep quiet and let them go unchallenged on that point. Whichever Party manages to win the argument over the interpretaion of the economic crisis will have the best chance of winning the 2015 election.
Gordon Brown is not the ‘country’s bogeyman’ (i take it you mean he is vastly unpopular across the country?). His majority in his constituency went up, and inj th
Dr Pangloss,
You miss the point, that there is a case to be made by Labour – and a good one at that supported by a large number of economists and comparison with the response to the economic crisis in countries such as Ireland – that their response to the crisis was the correct one and saved the country from complete catastrophy (cash machines on the brink of closing?). Labour candidates will have no choice but to mention the deficit or cuts – it will be at the heart of debate and public consciousness for the next 5 years.
Whoever the new leader is will have to convice first the Party faithful and then the country that they have a clear and coherant – and stong – argument for defending Labour’s record in office and particularly on the economy. The coalition will quite obviously attempt to put every difficult decision they make into a context of ‘Labour failed – we’re just clearing up the mess’; it will not be enough for the leader or the Party to keep quiet and let them go unchallenged on that point. Whichever Party manages to win the argument over the interpretaion of the economic crisis will have the best chance of winning the 2015 election.