Osborne has laid the most obvious trap for Labour on tax credits. Will the party blunder in?

by Jonathan Todd

Ten years since 7/7. Ten years since London won the Olympics. Ten years since Robin Cook was telling Labour party events that he was meeting people whose fortunes have been transformed by tax credits, but who don’t realise that they have the (then Labour) government to thank rather than some obscure administrative change at the Inland Revenue.

While the Labour government did good, Cook argued, it was not credited with having done it, as it was done by stealth. The tax credits architecture that Gordon Brown quietly built, and which helped the UK to an impressively robust employment performance, even after the financial crisis, was loudly dismantled in George Osborne’s Budget.

Where New Labour reassured business, while using state levers to redistribute with minimal fanfare, Ed Miliband was a Labour leader eager to have business do more. Whether Osborne would have found it harder to take an axe to tax credits if Labour had trumpeted them as bullishly as Cook preferred, as well as whether Osborne would have been in the position to do so had Miliband more assiduously courted business, are imponderables.

As Osborne warmly embraced Iain Duncan-Smith’s welfare reforms to declare himself the bringer of social justice and adopted a form of the predistribution beloved of Miliband by accompanying his dilution of tax credits with legislation for a claimed living wage, Labour’s attempt to come to terms with these unknowns is complicated by Tory cross-dressing.

In spite of events in Greece, the Budget, unlike in 2010, was pitched less as a bulwark against calamity and more as a staging post to better future. In which we are all invited to share. Reality may struggle to keep pace with the one nation rhetoric. Particularly when a tool for creating an income floor (the statutory minimum wage, which is what Osborne has raised through his supposed living wage) is deployed as a replacement for incentives to additional work (working tax credits).

The minimum wage and tax credits may both be Brownite redistribution mechanisms. But they have distinct purposes. Which might be more widely understood if Cook’s advice had been acted upon. And certainly have been ridden roughshod over by Osborne. Because he wants to recast one as a virtue (the honest crust of the minimum wage paid by an employer to an employee) and another a vice (the supposedly insipid welfarism of tax credits).

While this contrast may be superficially attractive, it is, according to Gavin Kelly of the Resolution Foundation, “saloon-bar economics espoused by some on both left and right (to believe) that if tax credits are cut, employers will somehow decide to offer pay rises to fill the gap”. Predistribution was just a weird word from Miliband. It seems likely to be the struggle of falling incomes for the low paid under Osborne.

Avoiding such outcomes is why so many work so hard for Labour governments. The likelihood of one being created any time in the next decade, however, will crucially depend on the decisions of the few; namely the incoming party leadership.

They might choose to now do what Cook urged a decade ago: noisily defend tax credits. While Osborne’s conflation of minimum wage and tax credit tools imperils the fortunes of the low paid, this rebuttal risks placing Labour on the wrong side of Osborne’s crude moralism. As he has so comprehensively placed Labour on out-of-work benefits that Iain Duncan-Smith is able to survive, largely unscathed, the debacle of universal credit and other disasters. And his characterisation of Labour as morally bankrupt spendaholics has created such political room that there appears no limit to the fiscal targets that Osborne can trash and emerge politically unharmed.

Labour needs a more subtle strategy than Cookism a decade delayed. Even if the unwinding of Brown’s stealth redistribution imparts Cook’s criticisms with some prescience. If there is another Labour government, it must confront the challenge of more deeply embedding its policies than much of those of New Labour have proved.

Ten years also since Osborne started shadowing Brown. “With this Budget,” Janan Ganesh, the chancellor’s biographer, observed, “Osborne will feel that he has finally slain his man”. The Budget hurried to determine this parliament’s terms of debate before Labour elects a leader but Osborne has already travelled disconcertingly far. Notwithstanding all that the last parliament witnessed, Ganesh is right to see this Budget as embodying his most definitive closing of the Brown era.

Osborne began shadowing Brown by absorbing his settlement – accepting Labour spending profiles and much of Brownite orthodoxy – and has now created his own. Whoever the next Labour leader appoints as their shadow chancellor must aim for broadly the reverse journey. Cookism tempts them into more visceral opposition but given Osborne’s capacity to trap Labour may be a cul-de-sac.

“If you don’t like what’s being said,” Mad Men’s Don Draper famously said and Uncut quoted in our book published at 2013 conference, “then change the conversation”. We must fear that the longer Osborne endures, the harder Labour will find it to confront the hard truths that he contributes towards, and the more difficult Labour will find it to change the conversation. Another ten years till Labour government feels optimistic.

Jonathan Todd is Deputy Editor of Labour Uncut

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4 Responses to “Osborne has laid the most obvious trap for Labour on tax credits. Will the party blunder in?”

  1. Madasafish says:

    Another ten years till Labour government feels optimistic.


    Appoint Jeremy Corbyn and everyone will vote for the socialist paradise he offers.. Job done. Labour Government in 2020.Just do as the Greeks did when they voted in Tsipras..

    You KNOW it makes sense to choose a left of centre leader.

    (the men in whit coats are coming to take me away)

  2. I reckon that Harman might be cleverer than she seems, although I admit that that is setting the bar pretty low. She came up through the Hard Left, and you never quite lose that. She is of the same generation as Jeremy Corbyn, and in their early years in Parliament they were on all of the same sides. Deep down, in her heart of hearts…

  3. Landless Peasant says:

    There’d no Tory ‘cross dressing’, Osborne’s budget was a savage attack on the Working Class.

  4. Landless Peasant says:

    I would vote Labour again if Corbyn is leader. All we want is a proper Left wing Labour Party.

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