Don’t go to war over the deficit, says Dan Hodges

Compare and contrast. First, Ed Balls, on why he’s battling to win the leadership race:

“I will carry on fighting to stop unfair tax rises and the withdrawal of essential benefits, I will carry on fighting to defeat a coalition hell-bent on cutting public services, putting up VAT, cancelling new schools and turning recovery into a double-dip recession.”

Next, Pat McFadden’s speech to the Fabian Society:

“Had we won the general election there would still have been difficult decisions to come. Unless we absorb that, I believe there is a danger of being tuned out by the electorate. By contrast, acknowledging it increases the chance of our fight against what the government is doing being heard. ‘Fight the cuts’ is a tempting slogan in opposition, and there are indeed some that must be fought. But if that is all we are saying the conclusion will be drawn that we are wishing the problem away.”

Two statements, two weeks apart, highlighting one very big problem facing the party. Just what is our policy (or, come to think of it, our line), on the deficit?

For some, the issue is Labour’s magic bullet. Keep sniping at the cuts, and we’ll be back in the game by the end of the summer, ahead in the polls by the end of the year, and marching up Downing Street by the end of 2011. Actually, forget that, it’s not a magic bullet, it’s a magic artillery shell.  Let’s call down a relentless barrage against Cameron’s hatchet men, and those quisling Lib Dem appeasers, and everything will work out fine.

Others see only danger. They are visited by nightmarish visions of a return to the seventies and eighties. An undead army of Parka clad reactionaries taking to the streets, tearing up the prevailing social order. New Labour’s hard won reputation for fiscal probity and any prospect of a swift return to power devoured by the mob.

Not that Ed or Pat occupy either of these extreme positions. Ed is articulating the valid concerns of millions of working families, while Pat is trying to grab control of an issue he sees slipping from the party’s grasp. And within the legitimacy inherent in both positions lies our problem.

In fact, it’s not a conflict of legitimacy, it’s a clash between legitimacy and legacy. Look again at Ed’s statement. Stop unfair tax rises. OK, which ones? No VAT rises. Ah, we’re ruling them out now. For how long? No cuts to essential benefits. Fine. Which benefits do we regard as luxuries? No cuts to public services. None? Anywhere? Ever? No cuts to new schools. Brilliant. Is that a commitment? Our next manifesto will contain a cast iron pledge that Labour will pay for  every school, bunsen burner and blackboard axed by the Tory-Lib Dem government?

Remember, this isn’t coming from Bob Crowe. This is Ed Balls. The man who brought us post-neoclassical endogenous growth theory. Who nailed us to Tory spending targets for the first two years following the 1997 election. Who lovingly embraced Prudence. Now Prudence has been ditched for the fiscal equivalent of Jordan, and Tory spending limits will lead to the death of the first born.

Pat McFadden again, “As the pain of government cuts bites, public opposition to them will grow, but people will still want to know what we would do differently – and they won’t believe us if our answer is just that we could make it all go away”. Yes, Pat, you’re right. But this is where legitimacy and legacy collide.

The party has seen the billions we spent on bailing out the bankers. Are people really going to accept that money isn’t available to purchase their primary school 30 more copies of ‘The Hunky Monkey’?  We were told time and again under Tony Blair that borrowing, in the form of the PPP and PFI, wasn’t a sin, but a necessity. Here’s an extract from his 2002 Conference Speech,

“I am not going to go to parents and children and patients in my constituency or any other and say I’m sorry because there is an argument going on about PFI we’re going to put these projects [schools and hospitals] on hold. They don’t care who builds them. So long as they’re built”.

This is the dilemma. How are   we going to wean ourselves off Tony Blair’s ‘build now, ask questions later’, brand of New Labour Keynesianism, whilst constructing a challenge to the Tory-Lib Dem cuts that doesn’t undermine our political and economic credibility?

Here’s how. It’s going  to require the movement to engage in a way that it hasn’t engaged for more than a decade. It’s going to need all of us; left, right, unions, activists and leadership to climb out of our bunkers, sit down and start to build a mature consensus on how we confront the deficit issue.

We’re going to have to stop accusing those who urge caution of betrayal and characterising those who demand action as pseudo-anarchists. We’re going to have to acknowledge that we need to fight the cuts in a vigorous but disciplined way. And we’re going to have to realise that a campaign of opposition cannot be mounted in isolation from a clear statement of what we, as a credible alternative government, will do to tackle the debt crisis.

Before the election, Mervyn King was reported to have said that whoever won would be “out of power for a generation”. We have the opportunity to prove him right. But if we get this wrong, and we fail to combine passion with pragmatism, it is us, and not David Cameron, who will end up paying the price.

Dan Hodges is contributing editor of Labour Uncut

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3 Responses to “Don’t go to war over the deficit, says Dan Hodges”

  1. @epictrader says:

    Good article about an issue addressed in his blog by Hopi Sen recently in which he argued that this must be tackled as a priority by the new Labour leader. The 5-live debate this morning demonstrated the likely outcome amongst the electorate if we don’t – weak responses from all of the leadership candidates that directly avoided a response to the simple question, “what would Labour have done?” ….and an increasingly frustrated and cynical live-audience response and, frankly, who could blame them?

  2. Action on the deficit is needed to appeal to many voters.

    But don’t forget that the cuts will hit hardest on our core working-class support, and we cannot be seen to abandon them. Not only do we need them to turn out in Scotland, Wales and the locals next year, but if we abandon them to the cuts we’ll annoy a lot of middle-class voters who vote for us out of solidarity with the working classes.

    I appreciate there’s a need to appeal to voters who are concerned about the deficit. But let’s not fret about voters who think it’s the only issue. Until they change their mind, they’ll be certain Tory voters and in the pursuit of them we’ll alienate fiscal doves.

    And that’s before we even got on to considering the economic consequences of cuts.

    As is almost always the case, we need to take a middle path. We’ll still get called deficit deniers for it, but that’s unavoidable. If we called for the abolition of pensions the Tories and a good proportion of broadsheet commentators would still call us deficit deniers. So let’s not go further than is economically sensible or electorally advantageous.

  3. Jamie Dixon says:

    If we were still in the run up to a general election then I would accept it was important to build on the view that “Action on the deficit is appealing to voters”. However, we are not and what voters currently find appealing about tackling deficits is far less important that getting on the correct side of the economic argument that is going to play out for many months and potentially several years.

    Hopi Sen is right – the new Labour leader had to get a message and a position on this quickly. Balls is closest to having such a message and being on the right side of the argument. The Millibands, as with Pat MacFadden’s piece above, are being short-sighted on this. That maybe what the Millibands needs to do in order to win the leadership, but Labour then needs the winner to adopt the Balls position on the deficit in order to win the bigger political battle.

    Supporting deficit spending today is not a lurch to the left, it is sound economics and a strategy for re-taking the progressive centre ground, which is currently captured by Cameron and Clegg. This argument will run for a long time due to the economic conditions we find ourselves in. When eventually the economy starts to recover strongly, then the message can change again to cutting the deficit (which will happen naturally at that point). Until then don’t support cuts because it simply gives the coalition government more cover.

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