Labour is headed for trouble in next week’s spending review

by Atul Hatwal

Next week, George Osborne will finally spring his long prepared spending review trap.

Here is the chancellor’s basic choreography: the Tories announce an eye-wateringly tight spending round, Labour opposes and the Tories attack Labour for being unreformed spendaholics.

Alternately, Labour back the government’s spending plans, in which case, the Tories attack Labour for being reluctant converts to fiscal responsibility and, as a happy sidebar, Labour’s Keynesian prescription for boosting spending to revive the economy is effectively de-funded.

Either Labour play to the stereotype of profligacy that lost the last election or become me-too Tories.

Ed Balls’ big speech a few weeks ago was intended to unpick this problem and re-position the party. The commitment to aggregate Tory spending plans covered the party’s fiscal flank while Ball’s retained the Keynesian differentiation with his £10bn capital spending boost, funded through increased borrowing.

On paper, it went some way to neutralising the chancellor’s likely attacks.

But there’s a problem.

Now Labour has shifted to a more politically realistic position on spending, it needs to robustly assert this new line.

It needs to use every opportunity to publicise the  new approach. To make the progressive case for adhering to overall Tory spending totals (while having different individual priorities) and ensure the public knows that a major change has just taken place.

Otherwise, next week, the Tories will hammer the party for running scared of its own policy. They will paint Labour as insincere and irresolute on spending. The taunts about whether Labour believes what it says will turn the party’s economic drama into a political crisis of leadership.

For the public, the net result will be little different to if Labour hadn’t changed its fiscal stance. Perhaps worse, when taking into account the collateral damage to Ed Miliband’s personal ratings from any squirming on policy.

It might be that, next week, Miliband leads the way with a stout exposition of Labour’s new economic reality but the signs aren’t encouraging.

When the two Eds made their economy speeches, two specific changes were briefed as examples of the types of tough choice Labour is now prepared to make: cutting winter fuel payments for wealthier pensioners and child benefit for higher rate tax payers.

In both cases, the people who lose are the better-off.

Politically this isn’t a particularly tough choice. All cuts bring pain and the choice between cutting benefits for the comparatively wealthy rather than the less well-off is hardly difficult.

If this were the only type of decision to be made, then the party wouldn’t have a problem.

Unfortunately, in the real world, choices need to be made where even the most deserving will be impacted.

We’ve heard nothing from Labour’s leadership about these types of choice. The ones that will constitute the majority of actual spending decisions and that are absolutely implicit in the commitment to maintain this government’s spending totals.

Unless Ed Miliband and Ed Balls are prepared to embrace not just the new policy, but all of its implications, Labour will be in trouble next week.

Without giving some indication that Labour would be prepared to make some of the genuinely difficult choices, the two Eds risk leaving the task they began in their speeches, unfinished.

The Tories will be unrelenting. They will relish the cuts and challenge Labour to specifically back individual measures.

In response, Labour’s leaders will need to be strong and clear. While not giving a commentary on every single Tory cut, they will have to emphasise over and over again that overall Labour would not spend a penny more than the Tories apart from the ring-fenced £10bn capital investment programme.

Most of all, they will need to give an example of the type of genuinely tough choice that they will be prepared to make. The type of specific cut they will implement so that the next Labour government remains within this government’s spending totals.

Something that shows they have the stomach to carry out a policy that will involve cuts which will draw much political blood.

It will upset the unions. Len McCluskey will break his silence and be unequivocal in condemning Labour’s approach. The left of the party will bemoan the betrayal. And there will be disunity as doubts are ventilated online and on air about Labour’s new strategy.

But unless Ed Miliband and Ed Balls follow through on the logic of their speeches, and face down their internal critics on the left of the party, George Osborne will have won.

Labour will have talked about a new direction but the two Eds’ actions will not have borne it out.

For the watching public it will be the same old Labour headed for the same old result at the next election.

Atul Hatwal is editor at Uncut

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7 Responses to “Labour is headed for trouble in next week’s spending review”

  1. Michael says:

    Was it not said that the true enemy of socialism was the distinction between capital and revenue?

  2. steve says:

    “The type of specific cut they will implement so that the next Labour government remains within this government’s spending totals.”

    Best way to ensure a future Labour government remains within Tory spending totals is for Labour to reproduce the Tory manifesto with only a footnote added mentioning the proposed £10bn capital investment programme.

    Job done and election won!

  3. swatantra says:

    There could be troubles ahead … 2013 is the definitive year for Ed, and it could be the crossing of the Rubicon, and no turning back.

  4. Renie Anjeh says:

    My understand was that the £10bn capital spending was from the housing benefit bill funded through controlling rents to build at least 200,000 homes a year. That is a good policy. The £10bn could be simply funded by reforms to Whitehall or capital gains tax on all home sales – or both. Labour shouldn’t spend a penny more than the Tories but at the end of the day, the left of the party have nowhere to go to. If they want to set up a leftwing UKIP, it won’t work.

  5. steve says:

    “the left of the party have nowhere to go”

    You could be onto something there Renie – perhaps they won’t go anywhere, perhaps they’ll stay at home on polling day and not bother voting.

    I don’t consider myself to be part of the Left but even a middle-of-the-road one time Labour loyalist like myself can’t be bothered heave himself out of the armchair and trek to the polling station to vote for Tory look-a-like Labour.

    Clearly, you have the enthusiasm but I doubt there’s enough of you to win a general election.

  6. Alex Harvey says:

    You defeatists are SO tiresome.

  7. BenM says:

    Just in the nick of time borrowing for 12-13 came in higher than 11-12 according to the ONS on Friday.

    Enough political cover there to deflect a lot of the Tory attacks described above (and I agree the cannons were being readied although how accurate Tory economic attacks can be after three years of stagnation is anyone’s guess).

    To offset this a bit, the ONS will likely revise away the double dip recession before the chancellor stands up. But for Osborne to boast that escaping a technical recession is somehow a victory is not easy.

    So all to play for.

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