by Peter Watt
This week saw yet another u-turn by the chancellor. This time over the imminent rise in fuel duty now delayed until Christmas at least. It was all great fun as George Osborne further dented his reputation and future leadership prospects. Rightly Ed Balls had a ball pointing out the increasingly lengthy list of u-turns since the budget. But there was another piece of economic news this week that was much more significant.
Mervyn King, Governor of the Bank of England, was appearing at the Treasury Select Committee on Tuesday and his conclusions were pretty grim:
“When this crisis began in 2007, most people did not believe we would still be here. I don’t think we’re yet half way through this. I’ve always said that and I’m still saying it. My estimate of how long it will take to recover is expanding all the time. We have to regard this as a long-term project to get back to where we were, but we’re nowhere near starting that yet. We’re in a deep crisis with enormous challenges.”
So however bad we think it is at the moment, we ain’t seen nothing yet. There are years of tough times to come whoever is in government. Years of cuts and years of tough decisions. We already know that the majority of the proposed cuts to public spending, the level of which we have accepted, are still to come.
But it feels at the moment that many in Labour have comforted themselves with the notion that (1) George Osborne is useless and (2) all we need are some pro-growth policies.
Then as growth returns and tax receipts rise we can avoid tough decisions. But setting aside that delivering growth is easier to say than to deliver; even if the economy began growing Labour would not be able to avoid those tough decisions should we form the government post 2015.
Rightly the party has stopped trying to fight every cut and in some policy areas has even said what spending it would prioritise and what it would cut. But it really does seem that there is still a reluctance to fully embrace the realities of the sort of economic outlook outlined by Mervyn King.
Take this week and the welfare reforms outlined in David Cameron’s speech on Monday. Clearly Labour will rightly oppose many of the proposals should they ever actually see the light of day. If you want to know why then just read this very powerful piece from Kevin Peel where he outlines his personal experiences of living on a low wage. As he says of some of those he knew in a similar position:
“These people were not scroungers sponging off the state, but often young people who were forced to leave home because of their sexuality, or because of violence, or simply because their parents couldn’t afford to look after them.”
But opposing some or all of the Cameron proposals is not the same as having a welfare policy that reflects the economic realities we are facing. And the fact remains that Labour will still have to do something about rising welfare bills even though we will want to take a different approach to David Cameron. But you hear it all the time, “Labour is for growth not austerity”. And this seems to mean that we are against welfare reform, against public sector pension reform and are in favour of more money for the NHS.
So we no longer oppose every cut or reform because we don’t have to – because we are in favour of growth not austerity. It is all very convenient.
For the time being, attacking the government on its inability to get us out of a recession is effective. And obviously, arguing in favour of a slowing down the pace of austerity and some easing of the public purse in order not to choke off growth is sensible. But Labour simply cannot allow itself to become caught in the headlights of “growth not austerity”. The public simply will not believe that a return to growth alone will sort out the public finances. But this view is gaining currency across the movement, just look at what Steve Hart, political director at Unite said this week:
“We will be working hard to win the battle of ideas – in these momentous times, we need radical, alternative policies. The 2015 election will be more like 1945 than 1997, and we need the policies that reflect this. Growth not austerity is Unite policy and the policy of the Eds.”
So “growth not austerity” is the new “stop the cuts”. I would suspect that Ed Balls doesn’t in fact actually believe this for one minute. He knows that a return to growth will not alone sort out our public finances. But allowing this argument to gain currency is politically expedient. But it also risks Labour avoiding having the very necessary debate about what the priorities of the next Labour Government will actually be. And worse, when it comes to the next election, “growth not austerity” will not convince enough voters that Labour can again be trusted with the economy.
Peter Watt was general secretary of the Labour party
Tags: growth not austerity, Peter Watt, stop the cuts, Unite
“But Labour simply cannot allow itself to become caught in the headlights of “growth not austerity”. The public simply will not believe that a return to growth alone will sort out the public finances”
This is a shame because growth IS the only way to sort out the public finances.
I’d have thought 2 years of total, complete and unmitigated failure of austerity might have got Peter to ask himself how effective really was the cuts snake-oil he was attempting to foist on Labour in those early days post Ed’s election to the leadership.
This rehash of those bankrupt ideas seems to show Peter, like Osborne, has learned nothing. It also shows just how much politics is infected by the gangrene of neo-liberal ideology.
Peter Watt
Which cut’s haven’t Labour opposed?
You’re completely deluded.
How much do we save and get in taxes for each unemployed person going back to work? 15K a year perhaps.
Get a million back to work and that’s 15bn off the deficit of 150 bn, and that assumes no spending to get them back to work. Currently that’s 5 bn a year.
So you can’t do it with growth. To get the other 135 bn in your plan you are going to have to take 135 bn from the other people who are working.
Why aren’t you telling people you want to tax the buggery out of them?
I’d have thought 2 years of total, complete and unmitigated failure of austerity
========
We haven’t had any austerity.
We have had 150 bn a year borrow and spend. They Keynsian solution. It hasn’t worked.
Government spending is up in real terms.
Wow.
Peter shows great timing by writing this economically illiterate article on a day that we find out the ongoing recession was deeper than first realised.
I think the right of the Labour party owes Ed Balls an apology for the way they treated him when he first became shadow chancellor. Fortunately he didn’t listen to Labour uncut then and he won’t listen to peter now.
And while we are on the finances Peter. Any chance apologising for the state you left the finances of our party in?
The Future – not quite sure how this is economically illiterate at all. The notion that growth alone will tackle our public finances is a joke and I am pointing out that it is foolhardy to allow ourselves to think otherwise. Incidentally it was Labour Uncut that first started talking about not opposing every cut – something Ed Balls agrees with. As for the personal attack, your ignorance about what happened says more about you than me.
So you take no responsibility for the state you and Blair et el left the parties finances in?
I also find it amusing that you think Labour uncut was at the forefront of thinking with the idea that we shouldn’t oppose every cut. Seriously peter, has anyone ever said that no matter what it is we should oppose a cut.
No not at all.
There is a deeper reason ‘growth not austerity’ will be as ineffective for us as anything else attempted thus far. The same reason any encouraging polling data is all but meaningless at this stage in the parliamentary cycle; the game has not yet begun. We haven’t lost yet. In ’97 the Tories didn’t just lose, we beat them. Badly. We broke their spirits, then we reminded them – and the public – about it, and then we salted the earth in a blaze of glory. It’s because of this the country experienced an almost collective social paradigm shift in attitudes towards areas such as tax & spend and gay rights. A battle of *ideas* was won. In 2010, not only were we spared the same disgrace of being beaten, but we didn’t actually lose either. And it’s time we admitted that we deserved to.
The British left is unknowingly trapped in an existential crisis from which we will not recover until we realise our woes go far deeper than the first, surface layer of economic strategy that the he media reports on, the public knows about, and we obsess over. We have no consciousness raising story precisely because the real political battleground of the the next 15 years exists on a terrain we are too cowardly to enter; the complete re-orientation of the relationship between the citizen and the state. The inevitable, and to the thoughtful on the left, desirable, future will be one where the citizen is more autonomous and self-authoring in attitude, and with mindset of the active participant rather than passive recipient in respect to public services.
Most of us are queasy about anything that smacks of individualism or bastardised neo-liberal politics because we cannot tolerate the possibility of being misconstrued as sneering at the poor, even though most white middle class Labourites already live their personal lives in more individualistic ways while never giving away the recipe to those further behind us in the queue.
We will stand a chance of winning again after we are beaten, probably 2025 (unless the the whole cabinet goes to jail or the Government collapses in some freak event). Being beaten will be a long, slow, drawn out process, where Team Cameron will salt our political earth by de-constructing statist, top down, thinking and re-asserting socially conservative values, in much the same way it successfully did with our economic record.
We simply need to decide, in advance, which battles we are prepared to lose.
Livy
The Future – large parts of the left do think that the cuts are unecessary. And in terms of party finances I’ve written loads on the issue – here’s an example
http://labour-uncut.co.uk/2012/03/28/time-for-ed-and-cam-to-grow-up-on-funding/
http://www.rollingstone.com/politics/blogs/national-affairs/the-price-of-inequality-interview-with-joseph-e-stiglitz-20120625
“Let me put it very forcefully: No large economy has ever recovered from an economic downturn through austerity. It’s not going to happen in the United States and it’s not going to happen in Europe.”
Joe Stiglitz, Nobel Laureate economist.
You may not agree and don’t share the macro-economic model that I subscribe to, but Plan A has failed by any standards. First five years of austerity, then seven, now ten, and how long before it becomes twenty years of austerity.
Yes the cuts are not just unnecessary but counter-productive. You don’t appear to be offering anything the Tories are not already trying.
The spirit level provided evidence that inequality damages society if that was not already self-evident.
There is a better way, and a hope for the future, but not through fiscal conservatism (or neoliberalism which has failed for the last thirty years).
The orthodoxy is wrong, and destructive for the majority, just look at how corrupt the banks are!
There is an alternative, and it offers a better future, join us on the left.
Where people matter more than money.
The cuts are unnecessary , but thats not a left wing response its basic econ 101 Keynes. Ideas held by those well known Trots, Martin Woolf, Lord Skidelsky, And dear old Sam Brittian amongst many other economists and economic historians
What the economy needs now is a massive fiscal stimulus not pointless cuts that only result in a rising deficit.
Not only is Mr Watt’s approach bad economics its increasingly bad politics as the evidence grows that the public are begining to tire of the Tories ‘no alternative’ mantra
AJ2 – are you saying that there is no need for any austerity measures and that a Labour Government will deliver growth and all will then be well ?
“The notion that growth alone will tackle our public finances is a joke”
Sigh.
Was it a mirage or did I see the ONS report borrowing rising last month v 2011?
In a slump cuts don’t equal deficit reduction. It is as simple as that.
BenM *sighs* agree and I don’t say they do.
Anyone who seriously thinks the UK Government – of whatever persuasion – is going to be able to continue current borrowing levels over the next 5 years obviously does not follow economic news.
Whichever Government is in power in 2016 after the next GE will HAVE to cut spending AND taxes to stimulate growth. Period. That means weaning the UK of the entitlement to free Government money…
And Ed Balls knows that – like he knew about LIBOR fixing (no he did not but the FSA did) – so he’s just lying to people who want to believe they can have their cake AND eat it..
If you have to have a balanced budget Labour in 2016 would have to find £50 to £100B in spending cuts….And anyone who says cut Trident in reply is nuts..(the time to cut it was 5 years ago)
Peter Watt says:
June 28, 2012 at 8:29 pm
AJ2 – are you saying that there is no need for any austerity measures and that a Labour Government will deliver growth and all will then be well ?
The answer is yes
You dont attempt to cut public spending when the economy is flatlining . It really is basic stuff. For a basic guide you could take a look at Paul Krugmans ‘manifesto for economists published a few days ago in the FT. Or indeed his latest book ‘End this depression now’.
madasafish says:
June 29, 2012 at 7:17 pm
Anyone who seriously thinks the UK Government – of whatever persuasion – is going to be able to continue current borrowing levels over the next 5 years obviously does not follow economic news.
Whichever Government is in power in 2016 after the next GE will HAVE to cut spending AND taxes to stimulate growth. Period. That means weaning the UK of the entitlement to free Government money…
And Ed Balls knows that –like he knew about LIBOR fixing (no he did not but the FSA did) – so he’s just lying to people who want to believe they can have their cake AND eat it..
If you have to have a balanced budget Labour in 2016 would have to find £50 to £100B in spending cuts….And anyone who says cut Trident in reply is nuts..(the time to cut it was 5 years ago)
The government can now borrow at historically low rates of interest. In effect investors are paying the government to take their money. T
here is absolutely no reason why this is going to change in the near future
We should as Jonathan Portes has argued at the very least be borrowing to invest in our infra structure etc etc. Not to do so in these circumstances is a criminal waste