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Posts Tagged ‘deficit’

Labour must support George Osborne’s budget surplus law

11/06/2015, 04:15:30 PM

by Samuel Dale

George Osborne is fond of saying that in opposition you move to the centre while in government you can move the centre.

Ed Miliband’s disastrous attempt to move the centre from opposition is the latest example proving this valuable piece of political wisdom.

You can not change the rules of British politics from opposition but you can if you’re sat in the Treasury.

Labour built a new consensus over 13 years.

In the 2002 budget, Labour decided to increase national insurance contributions by 1p to fund higher spending in the NHS.

The Conservatives now back rising NHS spending every year.

The same is true of the minimum wage, devolution and public service reform

And so it’s happening again.

In his Mansion House speech this week, Osborne resurrected his idea to make deficits effectively illegal in “normal” economic times.

The plan is that only the OBR could approve a budget deficit and otherwise a surplus must be run. It shifts the political centre.

It’s an attempt to shrink the state and force future governments to cut spending or raise taxes if it wants to spend more.

Some in Labour argue it makes sense to “borrow to invest”, which justifies deficit spending even in good years. In simple terms it is sensible to take out a big mortgage loan (capital spending) but not a credit card (current spending).

Maybe. But the hard truth is that the economics don’t matter. With Labour’s economic credibility hole only the politics matter.

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What has changed on the deficit since general election 2010?

07/01/2015, 08:31:55 AM

by Jonathan Todd

This is the first of a series of pieces from Uncut on what has changed in respect of key political issues since the last general election. Looking over this timescale, we hope to distinguish the signal from the noise; what really matters from the day-to-day froth.

Liverpool played Burnley away on Boxing Day. The last time that happened was just before the 2010 general election when Rafa Benitez managed Liverpool. Roy Hodgson and Kenny Dalglish both did so between Benitez and the current reign of Brendan Rodgers. Hodgson’s tenure coincided with the near bankruptcy of one of the world’s great sporting institutions. Enter John Henry, deus ex machina. This American has invested in the club stadium and playing squad, including in Luis Suarez, who brought both disgrace and nearly a Premier League title. Life is easier off the pitch and harder on the pitch sans Suarez. Fans yearn to be made to dream again. And will soon have to hope to do so without talisman Steven Gerrard.

In summary, much has happened at Liverpool since the last general election. Soon after which, I wrote my first piece for Uncut on ‘the emerging politics of deficit reduction’. Since when, as much as politics feels like a rollercoaster, these politics have changed remarkably little. Around the time that piece was published, Peter Mandelson was fighting for airtime by launching his memoirs.

We would not convince the country, Mandelson conceded on the deficit, that the Tories were going too far unless we convinced them that we would go far enough. That reflection on the 2010 election exactly parallels the advice that both myself and Samuel Dale have recently given Labour’s current campaign. I called for ‘Don Miliband’ to show himself, Sam for a ‘carpe deficit’ moment. The terminology doesn’t matter, the point is the same. Mandelson returned to the debate before Christmas to make a similar point in a speech to a Progress and Policy Network conference. Labour, Mandelson advised, will only get a hearing on ‘what will the effect be on society and the economy?’ if we are clear on ‘how much must we cut public spending?’

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Carpe deficit: Miliband must seize his moment on spending cuts

23/12/2014, 10:39:15 AM

by Samuel Dale

It’s working. On Sunday, Labour took a seven point lead in an Opinium and Observer poll with 36% to the Tories’ 29%.

Sure, it could be a rogue poll, a one-off that misleads us all. Or maybe it is an example of what Damian McBride has called the rope a dope economic strategy while Labour Uncut editor Atul Hatwal said is Miliband’s attempt at triangulation.

With less than six months to election day Miliband has finally awoken from his deficit slumber.

Cut spending every year until the deficit is gone. Prepare shadow ministers for big cuts. Get debt falling by 2020.

Miliband’s speech on the deficit after the autumn statement was substantive. He finally admitted the next parliament would once again be dominated by cuts; deeper, more difficult cuts than this parliament.

It’s a far cry from his conference nightmare when he didn’t even mention it as part of his 10 year vision for Britain.

It is a huge relief for those of us calling for Labour to present a clear deficit reduction plan instead of burying its head in the sands.

Why has Miliband seemingly changed his mind? Firstly, Labour has been forced to change. It lost the debate on whether to spend your way out of recession. Then living standards started to rise, only just but leaving the cost of living campaign with less potency.

Secondly, George Osborne messed up. He outlined huge spending cuts and tax cuts that would reduce the state to 1930s levels.

It is scaring people and Miliband took his chance. Osborne opened up the space for Labour to seem seriously tough on spending cuts without being deranged.

Labour MPs now have genuine answers when asked how they will close the deficit: we’ll scrap it in five years without taking us back an Orwellian Wigan Pier.

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If we are all Labour Uncutters now, let’s do this properly

15/12/2014, 10:25:32 AM

by Jonathan Todd

We are all in the black Labourites now, Labour Uncutters and proud. It was In the Black Labour published by Policy Network in 2011 that reminded us that fiscal prudence and social justice are complementary. It was Labour Uncut at conference in 2013 who provided detail in our book on how this might be done, how £34bn of additional savings in 2015/16 could be reallocated to Labour priorities.

Both publications were contentious. They – at least In the Black Labour – are now orthodoxy. Higher debt interest payments, Ed Miliband noted in his speech last week, as In the Black Labour did previously, squeeze out money for public services and for investment in the long-term potential of our country. Following the Miliband speech, Phil Collins observed in the Times that the difference between an old Brownite and an old Blairite is about three years. The dates of Miliband’s speech and In the Black Labour prove him right to the week.

The headline used by Collins’ paper to report the speech – I’ll cut deficit but won’t reveal how, says Miliband – showed, however, that Miliband is yet to go as far as Labour Uncut has gone. In isolating additional cuts we’d support, Labour Uncut created resources to apply to different priorities. In the spirit of Mad Men’s Don Draper, we didn’t like what was being said about Labour (that the party can’t be trusted with public money), so we changed the conversation (by fronting up to enough cuts to create fiscal room for a set of policy priorities distinctly Labour and different from those of the Tory-led government).

Miliband didn’t do the full Draper. Maybe he got as far as a Pete Campbell, another Mad Men character. Moving in the right direction but lacking Draper’s uncompromising edge. Yet Miliband doesn’t need to that audacious to remake himself in Draper form. Carl Emmerson, deputy director of the Institute of Fiscal Studies, reckons he has a £50bn target to shoot at. That’s the fiscal room between Conservative plans and Labour’s commitment to balance current spending by 2020.

£50bn is ample to signpost a Labour future. But voters won’t reward what you promise if they conclude you won’t deliver it. The £50bn can play the role played by house building and childcare within the Labour Uncut book; the altered priorities made affordable by identifying sufficient cuts. The political gain that attaches to this £50bn, however, is conditional on demonstrating how we’d balance current spending by 2020.

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Labour’s wants to triangulate on the deficit but has forgotten how

11/12/2014, 02:45:44 PM

by Atul Hatwal

Today, Labour remembered the deficit. Good, it’s long over-due. The party senses an opportunity, one last chance to reduce the Tories’ double digit lead on the economy.

The theory is clear. George Osborne’s draconian spending plans are just too apocalyptic for the public. He’s opened up political space for a middle way, for Labour to triangulate and offer a deficit reduction path that does not necessitate taking a meat cleaver to the welfare state but does show a clear route back to a balanced budget.

The polls seem to back this approach. In yesterday’s ComRes poll, 52% agreed with the proposition that “it would be better to slow the rate of spending cuts even if it makes it take longer to get the country’s finances back on track” while just 25% disagreed.

Ed Miliband and Ed Balls are both on our screens today promising this middle way, hoping for a route back into the economic debate.

Unfortunately for Labour, and the country’s future, Miliband and Balls are going to be disappointed.

There is a strategic flaw at the heart of the party’s approach: Labour strategists have forgotten how to triangulate.

For triangulation to be effective, three conditions need to be met: there must be defined positions to the left and right on a topic which opens space in the middle, the public need to be dissatisfied with the polarised positions on offer and to trust the party or politician that is triangulating, to deliver on their centrist commitment.

It’s certainly true that George Osborne’s vision of austerity-max has shifted the Conservatives further to the right on the economy than their previous positioning. The much publicised IFS judgement that the cuts would take spending back to 1930s’ levels has resonated, with Osborne’s personal ratings taking a palpable hit – in the aftermath of the Autumn statement, YouGov found his net approval rate dropped from -8 to -11.

But the problem for Ed Miliband is that the left flank is occupied by Unite, most of the union movement and a fair proportion of the PLP, including some shadow cabinet members.

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Posted in Uncut | 15 Comments »

George Osborne hasn’t set a trap for Labour. He’s launched a boomerang

01/12/2014, 09:38:06 AM

by Jonathan Todd

George Osborne thinks he is being clever, setting a trap for Labour. But Labour should vote against his proposal, expected to be contained in Wednesday’s Autumn Statement, for a new law requiring that Britain’s structural deficit be eliminated by 2017-18. As it is not a trap, it is a boomerang.

“The duties imposed by the Bill are not accompanied by any corresponding sanctions,” he told MPs, when asked to vote by the then Labour government to put into law the halving of the deficit in two years. As declamatory legislation – an Act of Parliament which no one has any intention of enforcing – Osborne was right to dismiss it as “vacuous and irrelevant”.

Yet Osborne now advances his own declamatory legislation. What will follow as a result of his law from the deficit not being closed by 2017-18? Will the deficit be further extended by the government fining itself? Or will the government be required to learn their lesson in its prisons? It’s all funny money and silly politics.

Such tawdry legislation diminishes us. And if Osborne is going to pass laws making a deficit after 2017-18 illegal, doesn’t he anticipate people enquiring how he’ll make his government legal? Labour will make hay with speculation on what heartless plans he conceals. But his stated intentions are sufficient to damage him.

Under published Conservative plans, the Resolution Foundation “estimate that several government departments would face real-terms budget reductions of one-half or more between 2010-11 and 2018-19”. Budgets for DfID, the NHS and schools are nominally ring fenced, so other departments face a halving of their budgets.

How will the Home Office keep us safe on a shrunken budget? Are we to win ‘the global race’ with an FCO so puny? Will local government be recognisable after ‘the jaws of doom’ close?

Osborne is asking MPs to vote to make the continuation of government as we have known it illegal. While by 2010 there was fat to trim in the public sector, there is now less, so his plans entail a more dramatic state curtailment.

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How does Labour get its economic message across?

17/03/2014, 04:35:39 PM

by Jonathan Todd

“The last Labour government,” The Times front page last Friday reported Ed Balls as saying, “didn’t regulate the financial services in a tough enough way.” They reported this as “the closest to an acknowledgement of personal responsibility” for the 2008 financial crisis. Yet, given that Balls has said similar things in the past and is silent on whether the last government spent too much, it seems a relatively mild contrition.

Apparently, there are a range of views within the party as to how Labour should address a central Tory attack: “Why hand the keys back to the guy who crashed the car?” “Senior figures close to Tony Blair have been urging a more aggressive rebuttal”, The Times report. “Ed Miliband’s allies want to focus voters’ attention on the future.”

If Blair is advocating an aggressive rebuttal, I imagine he means on behalf of the 1997 to 2007 government, rather than the Gordon Brown administration. It’s a stretch to imagine Balls running on a “Tony was right, Gordon was wrong” campaign.

The debate over how Labour wins the economic argument was also considered in the book that Uncut launched at party conference. “We might change the conversation,” I wrote, “in which the Tories present us as addicted to spending by changing what people think of our past (“It was the banks, not us”) or what people think we think about our past (“It was partly us but we’ve learned our lesson”) or what people think about our future (“Here’s why it will be different next time”).”

Thus, Balls seems to want to say “It was partly us but we’ve learned our lesson”, while Miliband appears to want to argue “Here’s why it will be different next time”. In these terms, the approach advocated by Uncut is closest to that of Milband. “Because there is a limit to how much repositioning Labour can credibly make this side of the general election, we focus on the future.”

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Forget Teddy Roosevelt, LBJ’s public service reforms show Labour the way to do more with less

27/01/2014, 05:24:10 PM

by Rich Durber

Ed Balls’ speech over the weekend announcing that Labour will aim to run a surplus by the end of the next parliament raises significant questions about public service reform. No matter whether you viewed the pledge as necessary political positioning or not, to make it a reality the next Labour government will need to significantly reform the state, without more money to spend.

There has been much talk in Labour circles over the past few days of Theodore Roosevelt. Commentators and activists alike have been debating the merits of ‘trust busting’ since Ed Miliband’s speech on banking reform. While the Roosevelt comparisons are certainly a fitting parallel for Ed’s plans to reform the private sector, it is less clear thus far what the party’s plans are for the public sector.

This has not always been the case. When he launched his campaign to be leader of the Labour party Miliband declared: “we need a new way of thinking about the state…We need to show we are the people who can reform the state to make it more accountable and give power away.” After Ed Balls’ speech it is clear that this strand of thinking will need to be revisited.

In doing so perhaps it is a different American president, Lyndon Johnson rather than Roosevelt, from whom Labour should draw inspiration. As fifty years ago this month he showed how the state can extend opportunity, even while reducing spending.

It was January 1964 when Johnson used his first State of the Union address to declare “unconditional war on poverty in America”. The chief weapons in that war, Johnson said, would be “better schools, better health, better homes, better training, and better job opportunities”. Its aim was “to help each and every American citizen fulfil his basic hopes…for a fair chance to make good”.

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Labour needs to stop fiddling and get on with the big stuff

22/01/2014, 07:49:35 AM

by Rob Marchant

The opportunity for Labour to score party points against the Tories on the economy is clearly diminishing. While that is difficult rather than disastrous, our reaction is important.

Last week, FT’s Janan Ganesh tweeted a characteristically shrewd observation: influenced by campaign groups, Labour seemed to have furthermore abdicated responsibility for forming a competing macro policy. It had therefore embarked on a series of eye-catching micro initiatives with social aims – intervening in energy markets, stopping payday loans and so on – but had gone quiet on the economy at large.

While many of these measures are fully respectable and positive in themselves, they are hardly a substitute for a robust macro policy, clearly distinguished from the coalition’s. And the obvious danger is that while the coalition looks strategic, we look, to put it bluntly, like tinkerers rather than players.

The culmination of all this micro thinking came last Friday, with Miliband’s statement on banking reform.

Now, banking reform is important and, on the face of it, an ideal place for Labour to make a difference. Why? Because we know (i) that it needs reform, and (ii) that the Tories will soft-pedal on anything which affects City friends and donors – that’s the reality. So far, so good.

But this noble end doesn’t mean that this is the right means. Because, here’s the thing: Labour has straight-facedly announced that the centrepiece of its solution is to create not one, but two new high street banks.

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Posted in Uncut | 9 Comments »

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

21/10/2013, 11:11:21 AM

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.

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Posted in Uncut | 5 Comments »