Why the eurozone crisis is lethal to Labour

by Atul Hatwal

The eurozone crisis is an unmitigated disaster.

I know, hardly breaking news. But I’m not talking about the impending threat to global capitalism. Worrying as it is, rivers of words have flowed on that topic. It’s Labour’s electoral prospects that are the concern here.

On the face of it, the crisis should have improved the party’s standing in relation to the Tories.

The government’s economic strategy is in shreds. Growth has been flatlining for months, domestic demand is anaemic and now the fate of the mythical export led recovery rests in the hands of reticent eurozone members who have demonstrated a singular inability to get ahead of the markets.

Many of Labour’s criticisms have been vindicated and now, of all times, the public should be taking a look at Labour as a realistic alternative.

But they’re not.

And the longer the crisis continues, the less likely that becomes.

For all the catastrophic implications of the crisis for the government and it’s economic approach, the underlying narrative of what is happening in the eurozone is kryptonite for Labour.

The common story running through all the tribulations on the continent is that the markets destroy countries with high public spending.

Regardless of the economic realities of the situation – we’re not Italy or Greece, never were, never would have been under Labour, and besides, we’re not in the euro – the crisis is confirming the visceral fear of runaway spending within the British voters’ psyche.

It’s why they voted the last Labour government out of office and is a fear that has since remained at the forefront of their considerations.

The YouGov polling where questions on the deficit are asked has remained almost unmoved over the past year. Between 55% and 59% consistently think that the way the government is cutting the deficit is necessary while between 37% and 39% blame the last Labour government for the current spending cuts. In comparison just 23-25% feel the current government is responsible.

The public’s settled view is that as bad as the cuts are, they still trust the Tories more than Labour to make the reductions they consider necessary.

It is in this political context that the crisis has unfolded. The impact will take some time to feed through fully into the polling but there are already some early signs of movement.

Although the top line voting intention results are still showing a Labour lead of 5-6% there has been a shift in the last two weeks in some of the more pointed voting questions asked by YouGov.

One of the weekly questions is whether voters would prefer a Conservative government led by David Cameron or a Labour government led by Ed Miliband. Over the last fortnight the lead for Cameron and the Tories has been six points – the highest it’s been all year.

Then there’s the question asking voters which of the different permutations of coalitions between the parties or single party government would be best. The most popular option in the last poll at the end of October was for majority Conservative government at 32% with the lead over those preferring a majority Labour government the highest it’s been all year, at 3%.

It’s not clear yet whether these trends will continue and the Tories build a solid lead in these questions, but what is not happening is any sign of Labour revival as a result of the government’s euro woes.

Spending is the political gift that just keeps giving for the Tories. Like tax in the 1980s and 1990s, it has become a dirty word which is used to stain Labour with a modern day mark of Cain.

The tragedy for the party is that it didn’t have to be this way. There was a route to simply neutralise this issue last year that was not taken – a high level commitment to the same overall borrowing targets as the government.

This wouldn’t have meant doing the same as the Tories as spending priorities could be re-ordered. And where there was a new programme that required increased funding, it could have been ring-fenced with specific fund raising measures allocated to pay for it.

After all this is what the party has partially done with the proposal to tackle youth unemployment, boost house building and reduce petrol prices, funded by an extended bank bonus tax.

Showing the public that the party had listened on spending and closing down this avenue of Tory attack would have transformed Labour’s position in the debate. But in their haste to move on from New Labour, the leadership have been blinded to the difference between political process – how to win elections – and political substance – what to do with power.

Their dislike of the final incarnation of Blairism is understandable. Very few people in the party would go back to the bad old days at the end of Tony Blair’s last  term where the only good policy for number ten was one opposed by the rank and file Labour party and the way to sell it was to triangulate using the Labour movement’s opposition as a totem that showed how centrist the government was being.

But there was a time when the balance was right.

One of the common phrases used by Labour cabinet ministers during the first term in government was ‘talk right, act left’.

For all the rhetoric on prudence and sticking to Tory spending limits, this was the Parliament where the minimum wage was implemented, the social chapter was joined and a major windfall tax levied on the utilities.

Unfortunately over time, process and substance fused for Blair and it became ‘talk right, act right’, but the common sense of the approach in the early years remains an example of how effective presentation can serve Labour’s political objectives.

Let’s not forget it was the Cameroon version of ‘talk left, act right’ that helped detoxify the Tories sufficiently to get them into government.

The old maxim about fighting the last war was never as true as when describing Labour’s current leadership. Almost to a man and woman they were there at the end of Blair, hated what they saw and are still reacting against their old master.

But the baby has gone out with the bath water; and because Labour is not even prepared to make presentational concessions to public concerns on spending, the party has lost permission to be heard on the economy.

That means that when the eurozone melts down, and the party has something important to say on the mistakes the government have made, the public has Labour on mute.

It means that in each interview George Osborne gives, flailing about trying to defend the government’s position, he unfailingly ends with their core message that Britain would have been where Greece and Italy are now if Labour had got in.

And it means the economic debate in this country remains ossified in a losing discourse for Labour on spending, when the real questions should be about growth.

This is why eurozone crisis is killing Labour; and unless it is addressed it’s why any economic issue that involves spending will push Labour ever further from power.

Atul Hatwal is associate editor of Labour Uncut.

Tags: , ,

12 Responses to “Why the eurozone crisis is lethal to Labour”

  1. Stephen says:

    “The common story running through all the tribulations on the continent is that the markets destroy countries with high public spending.”

    Not true. It’s the level of debt which is the main problem and also the budget deficit.
    Also it is not true that markets destroy countries it is simply that the money markets will start asking for a higher interest rate as that country’s ability to pay looks less likely.

  2. swatantra says:

    The time will surely come when someone is going to call for a Govt of National Unity, to get Britain out of this godamawful mess and crisis that Europe and the world has been plunged into, and which can only get worse.
    Labour will have to be prepared with an appropriate response. Will it wash its hands and walk away, or will it concede that the country, and all the main Parties, have to work together for a time, until we get through these ifficult times.

  3. BenM says:

    Oh calm the f*ck down.

    You may of missed it as you’ve got your head rammed up their backside but the Tories are making a total pigs ear of the situation too.

    2010 was their electoral high water mark. The Tories pant and wheeze even to attain their 2010 electoral level.

    So it’s all to play for.

  4. Nick says:

    The public’s settled view is that as bad as the cuts are, they still trust the Tories more than Labour to make the reductions they consider necessary.


    Except that spending is up in real terms over the last two years. In excess of inflation.

    So if there are cuts, then there are other parts of government that are creaming it in.

    Hence the deficit increases, and we go the route of Greece.

    It’s inevitable. The reason is that there are trillions of goverment liabilities hidden off the books. Pensions. PFI is peanuts in comparison. Bank bailouts are just 1% of the total government debts.

    It’s a basic fraud on a scale that dwarfs Bernie Maddoff or Enron.

    Hide all the liabilities so you can carry on spending.

    What is needed is investment, and several things need to happen for that to take place.

    1. The government needs to cut taxes. Firstly it frees up money for investment.
    2. The state pension system needs to stop accruing new debts.
    3. People should be made to save. That creates money for investment.
    4. Projects like HS2 that have negative returns need to be stopped. ie. Governments should not invest. If we take Labour’s mantra of investing in the NHS. The return is either higher productivity in the workforce leading to higher taxes. That’s not happened. Or it leads to efficiencies and lower spending. Cuts.
    5. Taxes on employment need to be cut
    6. Taxes on rewards for people who take risks need to be cut.

    That’s the way you get growth. However, since Labour speak for growth really means growth in taxes. It’s tax revenue that plugs the government deficit in Balls’ plan B. Not mentioned is it. We want to take more money off you.

  5. Graham Mx says:

    Sir / Madam
    To feed his insatiable need for money, GB’s first action on taking office was to raid private-sector pension schemes and take £5bn per annum from “hard working families” pension funds. Almost his last action was to double the rate of income tax, from 10 to 20%, on society’s lowest paid, financed by reducing the tax rate on those above mean income.

    Both of these actions adversely affected me, particularly the former, and I never lose an opportunity to inform / remind all I meet of how they, too, may ‘benefit’ from a Labour government.

    Finally, is “talking left, acting right” a euphemism for deceit and lying, in both words and deeds?

  6. Roger says:

    A counsel of despair that could have been written in 1931.

  7. Julian says:

    The trouble is that everyone wants the results of spending but no one wants to pay what’s required. Labour didn’t tax enough to support the spending plans it had sold to the electorate. Had the credit crunch not hit, it might have got away with it, at least until after the election. Of course, the credit crunch itself was caused by most governments doing what Labour did, increasing spending in order to appeal to the voters by increasing borrowing. Greece more than anyone else.

    The answer would be to have an honest debate about spending in the light of how it’s going to be paid for. It’s too tempting for Labour to emphasise the spending while downplaying the cost. And it’s too tempting for Tories to emphasise cutting costs while ignoring the impact. We’re left with what always happens in British politics. Labour fix public services and run out of money, so we kick them out. The Tories fix the economy and muck up public services, so we kick them out.

  8. AmberStar says:

    @ Atul

    Look, we can’t ape the Coalition’s economic strategy & then lambast them when it fails. Or are you actually suggesting that the Tory economic strategy will work? If you are, then rename this site: “We Are All Tories Now” & have done with it!

    Because you are missing the most important point about the New Labour strategy of saying Labour would follow Ken Clark’s plan for the economy: At that point the world economy was showing definite signs of being about to trend upward! Hitching your wagon to a rising economy is smart.

    On the other hand, hitching your wagon to a failing policy in a stagnant or downward trending economy would be risible.

    What was once a smart idea; is now, under different circumstances, rather silly.

  9. AmberStar says:

    @ Atul

    Your cherry-picking of YG polling is rather silly; in fact, you do the cherry-picky thing, then acknowledge that it’s silly & that trends are what’s important. So, I assume that you follow all YG’s trackers because the ones on the economy make interesting reading.

    The polling on whether the Coalition are managing the economy well is heading steadily south. Only 31% believe the Coalition are doing well, 57% say they are doing badly.

    Either the people don’t really need Labour to tell them that the Coalition are failing on the economy or Labour are succeeding in convincing people that the Coalition are doing badly. That’s not exactly: “Lethal for Labour”, is it?

    For now, Labour is achieving exactly what it needs to achieve; Coalition competence on the economy has trended down to 31%; & voting intention, with a slight delay, will almost always follow that trend.

    So, what are you suggesting with this article? After convincing a clear majority (57%) that the Coalition are doing badly on the economy, Labour should suddenly say we’ll adopt their policies… you cannot be serious!!!

  10. Keith says:

    Labour are not going to be re-elected until it acknowledges some of the catastrophic policies implemented by Gordon Brown as chancellor and PM. One of the worst of these was PFI,which, when in opposition he strongly criticized, but embraced it wholeheartedly when he could see how good it would make him look for it was kept off the balance sheet.

    The cost of PFI to later generations however, is astronomical with taxpayers having to pay for this for the next 30 years. It may have provided new school and hospital buildings at the time, but we are all paying for this now by lining the pockets of the very people in society who are suffering least.

    Why did the Left not challenge this farce at the time? Labour’s silence on this issue is deafening but until it comes to terms with the failure of PFI it has no credibility for economic prudence in the future.

  11. swatantra says:

    THe PFI also gave us the new A130 linking Basildon to Chelmsford which is a boon, cutting journey time down to just 25 mins. If Govt money could have been found it would have been a lot better. But the money wasn’t there. And we had been waiting for this essential road for 25 years.

  12. swatantra says:

    … no doubt that I and my children and grandchildren will benefit greatly from this vital link.

Leave a Reply