Beware of Osborne’s traps on the economy, says Jonathan Todd

Ostensibly, Manchester hasn’t greatly changed since Labour conference was last here. The buildings are all in the same place. The distinctive cool and charm remains. The corned beef hash at Sam’s Chop House still does the job.

Yet the British economy suffered a recession which shrank it by 6 percent in the intervening period. This is officially more than half way to a depression and a very big deal. Labour at the general election lost the trust of the people to steer the recovery from this. We won’t return to government unless we again become recognised as the party of economic competence.

The leadership election hasn’t flushed out a fully formed economic offer. Perhaps it was unrealistic to imagine that it could. However, some consensuses emerged. We want tax to play a bigger role in deficit reduction than does the government. But this risks the perception that we are a party of high tax, which is electorally arid terrain. And, while Danny Alexander may have suggested that this won’t happen, it would create a marked contrast between ourselves and the government if they do offer tax cuts in the second half of this parliament, upon which the Tories seem likely to insist.

Another consensus to develop during the leadership contest is that we want deficit reduction to begin later, proceed less aggressively and be more sensitive to GDP growth than does the government. But this risks the view that the party which built up the deficit in government lacks a serious plan for correcting it. That we are, in other words, reckless economic vandals. This is slightly hyperbolic, but isn’t so far removed from how many voters, whose support we need to form a government, see us. Consider, as an illustration of this, that 47 percent of voters in the south of England, according to new research by You Gov and Policy Network, thought that the last government’s spending had been “largely wasted”.

The attractions of the economic consensuses which were produced by the leadership election are clear. Nonetheless, to be blind to the risks which attach to these consensuses is to ignore the traps which George Osborne has laid for us. History suggests that we’ll struggle to get a full hearing for our (yet to be worked out) economic offering. We don’t want to gain an audience only to lose it immediately by blundering into Osborne’s traps.

This observation from Norman Tebbit in 2005 shows why we’ll have to fight to have our economic offer heard:  “For some 30 years prior to Black Wednesday, Gallup’s monthly tracking polls had asked respondents which party they saw as the more competent to manage the economy. Only once in all those years was the answer Labour. In the 12 years since Black Wednesday, only once has the answer been the Conservatives.”

What should this teach us? First, leadership on economic competence swept Labour into office and our loss of this lead swept us out of it. It is the economy, stupid. Second, once a party gains a lead on economic competence it doesn’t relinquish it lightly. The last time the Tories had such a lead over us it took us 30 years to overcome it. And, third, it took a catastrophe of Black Wednesday proportions for us to do so. But what made the political consequences of Black Wednesday different from, say, Black Monday, the stock market crash of 1987? Perhaps that we had Gordon Brown as shadow chancellor in 1992 and we didn’t in 1987.

As soon as he was appointed to this position, in the face of a media and political climate just as inclement as that which will greet our next shadow chancellor, Brown was utterly relentless and forensic in crafting an economic platform that would appeal to the whole country and overcome any southern discomfort. He courted prudence long before Sarah and the political impact of winning prudence’s hand was just as happy as his marriage to Sarah.

Black Wednesday, of course, helped us gain a lead on economic competence. But this lead may well not have materialised – even after the debacle of the exit from what Tebbit calls the Early Recession Mechanism – had we not had someone like Brown as shadow chancellor. Osborne’s economic stewardship undoubtedly threatens disaster. But warning of this won’t be enough for us to regain leadership on economic competence. After all, that’s what we tried to do at the general election.

Nor should we assume that the actuality of calamities induced by Osborne’s cuts will necessarily result in voters placing their economic trust in us. We will only reap a political benefit from such disasters if we can offer a credible and robust alternative approach.

Fully formulating this approach is the key task facing Ed Miliband and his shadow chancellor. Yvette Cooper, Liam Byrne and Pat McFadden are expected to address this afternoon’s plenary session on prosperity and work. While Ed Balls and David Miliband may be the front runners, this is a chance for them to make a pitch for the shadow chancellorship. Whoever comes to hold this post will be under tremendous pressure and will have only 13 days to prepare a response to the comprehensive spending review.

It would be best if they do so while making a concerted effort to avoid the traps that Osborne has carefully, but rather obviously, set. Once we accept that we won’t recover a lead on economic competence if we are seen as a party of high taxation, profligate spending and deficit denial, the way ahead on economic policy, though difficult, should be clearer. We should be party of tax justice, not high tax; effective public spending, not spending for its own sake; and a party of pragmatic and fair deficit reduction, not blanket opposition to all cuts.

Jonathan Todd is a consultant at Europe Economics and was a Parliamentary candidate at the 2010 General Election.

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3 Responses to “Beware of Osborne’s traps on the economy, says Jonathan Todd”

  1. AmberStar says:

    Or you could talk about other things that affect the economy too. This obsessing about the deficit; that’s the trap that Osborne has laid. If Labour’s entire economic platform is framed by Osborne, of course we will lose the debate.

    Widen the subject out. Credible policies about how the UK can earn more (don’t talk about growth & GDP & all that stuff that people don’t really get) – talk about how the UK can earn more & pay off the debt & invest in people’s futures.

    And make sure it is people’s futures; not the future of our education system, not welfare systems, not the way the NHS is managed – but people. How will people’s lives be changed for the better by a Labour government? 😎

  2. __________________

    Tract on Monetary Reform
    Credit is Like Nostalgia:

    It can lead to procrastination and prevent us to go forward!

    Our economy is slowly dying, your job, lifestyle are dominated by anxiety.

    The economy is kept alive artificially.

    No one is proposing a solution because no one has the slightest idea of why it is happening and many have vested interest in the present system.

    However an objective observation of the phenomenon can help us understand it and provide us with an innovative solution.

    Of course we can’t solve the problem with the tools that brought us there in the first place and we need a new ideology.


    – Do you feel that your ideology pushed you to make decisions that you wish you had not made?

    – Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

    – You found a flaw in the reality…(!!!???)

    – Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

    – In other words, you found that your view of the world, your ideology, was not right, it was not working?

    – That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.


    In order to alleviate those economic woes wee need to create, as fast as possible, a new credit free currency that will solve the credit crunch and bring incremental jobs, consumption and investments to the present system.

    An Innovative Credit Free, Free Market, Post Crash Economy
    Tract on Monetary Reform

    It is urgent if we want to limit social, political and military chaos.

    Is the fulfilment of these ideas a visionary hope? Have they insufficient roots in the motives which govern the evolution of political society? Are the interests which they will thwart stronger and more obvious than those which they will serve?

    I do not attempt an answer in this place. It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed. But if the ideas are correct — an hypothesis on which the author himself must necessarily base what he writes — it would be a mistake, I predict, to dispute their potency over a period of time. At the present moment people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible.

    But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.

    Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

    Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.


    Credit Free Economy
    More Jobs, No Debt, No Fear.
    Prosperous, Fair and Stable.


  3. charliechops1 says:

    Don’t kid yourself. There is no credibility with the electorate without a clear and decisive intent to cut the deficit. The distinctions from the Coalition should be: timing, extent, nature of the cuts and the mix of cuts and taxation; to oppose the nasty and support those of common sense. In practice it is not that difficult.

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