Osborne's feeble response to the growth crisis

You can't fault the Chancellor's chutzpah. But his growth strategy is paper thin.

As ever, George Osborne summoned a special chutzpah for his speech to the Conservative conference. In the midst of a growth crisis, he warned that "we should not talk ourselves into something worse", as if he had never spread the myth that Britain was on the "brink of bankruptcy". He insisted that the government could not afford to borrow a billion more to stimulate the economy, forgetting that he announced £46bn of extra borrowing at the Budget. And he hailed the "precious stability" that his deficit reduction plan had brought, failing to mention that it left us with a lower growth rate than every G7 country except Japan.

"Don't tell me this government isn't going for growth," the Chancellor snapped, taking a swipe at Labour and Conservative critics alike. But there were few signs of a change of gear. Osborne's response to the growth crisis? A re-announced £805m council tax freeze that will do nothing to cancel the damage wrought by his £12bn VAT rise.

The Chancellor's wager is that loose monetary policy (interest rates and the exchange rate) will compensate for tight fiscal policy (spending cuts and tax rises). He was clearer than ever on this point today. "We are fiscal conservatives and monetary activists," he declared.

The biggest difficulty for the government is that Osborne has few monetary weapons at his disposal. Interest rates are already at record lows and the exchange rate has fallen sharply since the crisis began in 2008. By contrast, after the savage cuts of the 1981 Budget, Geoffrey Howe was able to loosen the money supply by cutting interest rates by 2 per cent. Insofar as the government has a plan B, it is for further quantitative easing (QE). But with the cost of unsecured loans significantly higher than before the crisis, it is far from certain that another monetary injection will have the desired effect. Today, Osborne promised to begin "credit easing" - government lending to small businesses - a tacit admission that Project Merlin - the government's much-vaunted agreement with the banks - has failed.

It was telling that the most effective passages in his speech were not on the economy but on politics. Like his predecessor, the Chancellor is never happier than when identifying a dividing line (see Rafael's blog for more on this) or a partisan jibe. He quipped that Labour had ceased to be a "producer or a predator", one of the best attack lines of the conference season. He rebuked Vince Cable, who described some Tories as the "ideological descendants of those who sent children up chimneys", by noting that it was a Conservative who abolished the practice and that the Liberals objected. And he described Manchester as the city where Rutherford split the atom and the Miliband brothers split the Labour Party (a decent gag by his standards).

Unlike Cable, who spoke only of "grey skies" in his speech, Osborne ended by turning his gaze to the sunlit uplands, "the calmer, brighter seas beyond". Channeling Jim Morrison, he insisted that we would "ride out the storm together". One can only respond, not with your plan, we won't.

George Eaton is political editor of the New Statesman.

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Leader: Labour is failing. A hard Brexit is looming. But there is no need for fatalism

There is nothing inevitable about the right’s supremacy or a catastrophic Brexit.

Democracy depends on competent opposition. Governments, however well intentioned, require permanent and effective scrutiny to meet the public interest. For this purpose, the role of Her Majesty’s Opposition was enshrined in law 80 years ago. However, at present, and in the week Article 50 is invoked, this constitutional duty is being fulfilled in name alone. (The Scottish National Party speaks only for the Scottish interest.)

Since re-electing Jeremy Corbyn as its leader, the Labour Party has become the weakest opposition in postwar history. It lost the recent Copeland by-election to the Conservatives (a seat the Tories had not held since 1931) and trails the governing party, by up to 19 points, in opinion polls. The Tories feel no pressure from Labour. They confidently predict they will retain power until 2030 or beyond. Yet as the poll tax debacle and the Iraq War demonstrate, prolonged periods of single-party rule run the danger of calamitous results – not least, this time, the break-up of Britain.

Under Mr Corbyn, who formally lost the confidence of 80 per cent of his MPs last summer (and has not regained it), Labour has the least impressive and least qualified front bench in its history. Its enfeeblement has left a void that no party is capable of filling. “The grass-roots social movement of the left that was supposed to arrive in Jeremy Corbyn’s wake has not shown up,” the academic Nick Pearce, a former head of Gordon Brown’s policy unit, writes on page 36.

In these new times, the defining struggle is no longer between parties but within the Conservative Party. As a consequence, many voters have never felt more unrepresented or disempowered. Aided by an increasingly belligerent right-wing press, the Tory Brexiteers are monopolising and poisoning debate: as the novelist Ian McEwan said, “The air in my country is very foul.” Those who do not share their libertarian version of Brexit Britain are impugned as the “enemies” of democracy. Theresa May has a distinctive vision but will the libertarian right allow her the time and space to enact it?

Let us not forget that the Conservatives have a majority of just 15 or that Labour’s problems did not begin with Mr Corbyn’s leadership. However, his divisiveness and unpopularity have accelerated the party’s decline. Although the Unite general secretary, Len McCluskey, elected by a fraction of his union membership, loftily pronounced that the Labour leader had 15 months left to prove himself, the country cannot afford to wait that long.

Faced with the opposition’s weakness, some have advocated a “progressive alliance” to take on the Conservatives. Labour, the Liberal Democrats, the Greens and the nationalist parties are urged to set aside their tribalism. Yet it is fantasy to believe that such an alliance would provide stable majority government when nearly four million people voted for Ukip in 2015. There has also been chatter about the creation of a new centrist party – the Democrats, or, as Richard Dawkins writes on page 54, the European Party. Under our first-past-the-post electoral system, however, a new party would risk merely perpetuating the fragmentation of the opposition. If Labour is too weak to win, it is too strong to die.

The UK’s departure from the EU poses fundamental questions about the kind of country we wish to be. For some on the right, Brexit is a Trojan Horse to remake Britain as a low-tax, small-state utopia. Others aspire to a protectionist fortress of closed borders and closed minds. Mr Corbyn was re-elected by a landslide margin last summer. The Leave campaign’s victory was narrower yet similarly decisive. But these events are not an excuse for quietism. Labour must regain its historic role as the party of the labour interest. Labour’s purpose is not to serve the interests of a particular faction but to redress the power of capital for the common good. And it must have a leader capable of winning power.

If Labour’s best and brightest MPs are unwilling to serve in the shadow cabinet, they should use their freedom to challenge an under-scrutinised government and prove their worth. They should build cross-party alliances. They should evolve a transformative policy programme. They should think seriously about why there has been a post-liberal turn in our politics.

There is nothing inevitable about the right’s supremacy or a catastrophic Brexit. At present, the mood on the Labour benches is one of fatalism and passivity. This cannot go on.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition