If Labour adopts the proposals of the Fabian spending commission, it will pay the price at the next election

by Jonathan Todd

David Cameron – as, for some reason, he is always quick to do – taunted Labour thus in PMQs last week: “More spending, more borrowing, more debt. It is the same old Labour.” On the same day, a Fabian Society commission on the future of public spending reported that Labour could spend £20bn more in 2017-18 than the government currently plans.

If Labour were to adopt the recommendations of the Fabians, then the reaction of the prime minister is all too obvious. What is, though, more important to Labour’s 2015 chances is how the voters would react.

Polling by YouGov to support the book published by Labour Uncut at party conference gives us some indication.

This polling found that if Labour were to promise to keep most of the present government’s spending plans, but to borrow more specifically for public works such as building more homes, those who say this would make them more likely to vote Labour outnumber those who say it would make them less likely by 4% (17% more likely versus 13% less likely).

In contrast, a net 4% of voters say they would be less likely to vote Labour (12% more likely versus 16% less likely) if the party rejected any public spending cuts and instead allowed borrowing to rise.

The difference between these two strategies could be the difference between Labour winning and losing the election.

The Fabian proposal seems to fall somewhere between these two strategies. It doesn’t reject entirely spending cuts – a position that our polling indicates would be likely to cost Labour the election. Nor does it only go beyond the government’s plan exclusively for certain forms of investment – a strategy that our polling sees as compatible with Labour victory.

The Fabians’ intermediate position accepts some cuts but argues that slower deficit reduction and revenues from better growth can create £20bn of additional current spending in 2017-18. Whether this half-way house would be as likely to help Labour win the election as the tougher approach of only going beyond government plans for investment, not current, spending is not clear. Neither is the extent to which Labour need to commit to plans for 2017-18 this side of the election.

Being able to provide a detailed account of how Labour would approach 2015-16, the first year of the next parliament, is likely to be necessary to get Labour successfully through the election campaign. This should be sufficient to demonstrate that Labour can be trusted with public money and set out a different set of priorities from those advanced by the other parties. Whether these objectives necessitate Labour providing detailed prescription beyond 2015-16 is not obvious. We looked most closely at this year in our book.

However, the Fabians’ deserve credit for looking beyond 2015-16. Someone needs to be looking ahead on Labour’s behalf. The party’s leadership need to know how they’d navigate this tricky, future terrain even if they choose not to publicly articulate this until nearer the time. In so doing, Hopi Sen argues that they’ve looked into the abyss that many in the party sly away from.

The reality is though, they should have looked harder. Cameron and Ed Miliband are both sons of Gordon Brown in their reverence for departmental spending ring-fences – which the Fabians do not question. Yet these ring-fences drive deeper cuts elsewhere (e.g. social care, early intervention programmes) that increase cost pressures within the protected departments (e.g. A&E, schools) resulting in worse overall outcomes than would follow from more balanced cuts across all departments.

Dropping the ring-fences would be politically contentious but is consistent with a politics that prizes outcomes above all else. The Andy Burnham of the 2010 leadership election was right when he called for this to happen. The Andy Burnham of today may not be so bold.

Alistair Carmichael was right too when he pushed for the Scottish Office to be abolished in London and wrong when he agreed to run it. Vince Cable was also half right when he called for BIS to be abolished and completely wrong when he failed to run it in a way that delivers upon the localised growth strategy that our book advocates. The man from Whitehall doesn’t know best, even if he’s called Vince.

We need to be serious about having less top heavy government. We think we could be five departments lighter (DfID, DCMS, Northern Ireland, Scotland and Wales). This might be to think the unthinkable but can we really hope to meet the fiscal challenges of the next parliament, set out in detail by the Fabians, without such? And won’t this also be necessary to alter an entrenched perception – potentially a non-negotiable barrier to Labour forming a government – of Labour as profligate?

Cameron keeps attacking Labour in the way that he did at PMQs because he knows that this attack resonates. The popularity of Labour’s proposed energy price freeze should not distract us from the enduring threat that this poses. No Labour strategy can be entirely complete without the steps to neuter this threat by rendering Cameron’s attack absurd. This is likely to require tougher medicine that the Fabians are prepared to dispense.

Jonathan Todd is Labour Uncut’s economic columnist

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5 Responses to “If Labour adopts the proposals of the Fabian spending commission, it will pay the price at the next election”

  1. Nick says:

    So go on, tell us how those investments are going? All that time in power, where’s the return?

    It’s either efficiency, which means cuts, or there is some income stream for the billion spent.

    Ah yes, you don’t get the idea of investment do you. It’s just a sop to hide spending and looting of people’s pensions for your own and the favoured pockets.

  2. Nick says:

    Being able to provide a detailed account of how Labour


    How about a detailed account of what happened last time?

    For example you were increasing the national debt at over 734 bn a year, just for pensions. Not a bank in sight so its hard to blame them.

  3. David Ward says:

    Not entirely sure what abolishing DCMS would achieve. Most of the cash is distributed at arms length so little saving.

    Arguably one of Labour’s greatest achievements was creating a department which supported a sector which is now one of the only growing bits of the economy. We currently have an advantage in the creative sector while the Chinese and Brazilians are spending big to overtake us. Merging into BIS is not sending a v good signal, or indeed providing much support.

  4. Robert says:

    It is not sensible base judgements on a gap of 4%. That is within the margin of error, so only gaps of more than 10% are significant.

    The truth is that the next Labour Government will not have much money to spend. It will be sensible to promise a slightly slower pace of deficit reduction.

  5. steve says:

    ” Labour as profligate”

    Well, New Labour sank the economy and left us in the mess we’re now enduring.

    It’s not just a matter of New Labour blotting its copy-book – the entire ink-well was emptied over the copy-book.

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