Labour needs an argument about the state not just the deficit

It's time to start a blunter conversation about tax and spending choices.

Following last week's media storm about the season's new East-end duo, Abbott and Glasman, the real business of politics will get back underway this week. And if the weekend's reports are anything to go by it will see Labour moving to a more muscular position, or at least tone, on deficit reduction.

The new year strategy is set to play down the importance of spending levels to the next phase of centre left politics as it talks up other routes to social justice. "We can't spend our way to the new economy", as Ed Miliband likes to say. The intellectual effort required by Labour to carve out what it sees as a progressive austerity agenda will be every bit as demanding as that required in the 1990s to reclaim fiscal prudence. But in the end the politics of tax and spend won't go away, it never does. It will just return in new form.

The pressure for more fiscal resolve over the longer term is reinforced by a mood among Labour strategists that they have so far failed to turn the coalition's Autumn statement, with its admission that cuts will extend into the next parliament, into a new chapter in the debate on the deficit in which Labour gains credit and then moves beyond a sole reliance on its immediate "too far, too fast" critique.

The risk is that the Labour leadership now moves from talking about the short-term case for stimulus to talking about longer term deficit reduction without yet having a strategic account of what this would mean for the state: what it should do less of, more of, and differently, given the realities of the next decade and beyond.

There needs to be synchronicity between its position on the deficit and the underlying willingness to see through the hard politics of shifting ground on spending and tax. There will be no prizes for sounding more hawkish in the abstract and dovish when it comes to specifics.

Opposition is always a precarious balancing act. Between flashes of resolve on the one hand and the need to retain maximum flexibility to respond to events on the other. Between proving your relevance in the here and now via tactical raids and effective protest, and nurturing the belief that you are ripening as a governing proposition, cultivating ideas and attitudes that will chime with the needs of the next era.

And the little that we can glean about the times that lie ahead is that they are going to be very lean yet laden with new challenges. Once we emerge from the nasty decade we are now living through we will soon be bumping into the towering fiscal cost of an ageing society (read this OBR report to get a sense of the scale).

Any party that wants to win in 2015 with a claim to the future will have no choice other than to speak directly to challenges like these.

All of which reinforces the view that a far bigger and blunter conversation about future choices is needed than the one that Labour has so far embarked upon with the public.

What does a plausible Labour cuts agenda look like for 2015; what are real priorities for the future where Labour should seek to increase investment; and what does a Labour tax agenda for 2015-2020 look like?

There will of course be many views and no easy answers. But some answers are certainly easier and better than others. And though Labour certainly shouldn't be coming up with lots of detailed policies this far ahead of an election, nor should it fail to set out some clear directions of travel.

My own view is that there is a principled and progressive set of arguments that could be made about how the state should change its role in important ways.

It could, for instance, offer less generous support for affluent baby boomers in terms of universal benefits at the same time as it puts in place a proper Dilnot-esque system of social care, overwhelmingly paid for by the ageing generation itself rather than their working age counterparts.

It could invest far more in childcare supporting more women to work, raising family living standards, and spreading opportunity; and far less in supporting the most affluent in our society to build up larger pensions. It could invest more in growth-enhancing capital investment and new housing even if this means a longer era of low or no growth in current expenditure.

I don't suggest these changes alone are up to the scale of the challenge faced -- indeed, I know for sure they're not. Nor do I downplay the scale of the political problem in attempting even these sorts of changes; there will be plenty of heartfelt opposition.

But it is possible to make a start.

Despite sweeping and brutal cuts targeted at low-and-middle income families the coalition has gone out of its way to protect some large areas of less essential spending, meaning the first £10bn of spending re-prioritisation shouldn't be that hard to find (beyond that things get dramatically tougher).

If Labour can't muster the resolve to consider these shifts -- or alternative ones conjured by wiser minds -- I suspect it isn't going to persuade a sceptical public that it is distinctive or has what it takes to govern in the tough decade ahead. The alternative is a slide towards a soggy, cautious politics in which it feels boxed in by a left that cries "betrayal" in response to any proposed cut, and a right that screams "deficit denial" at any new consideration of collective action.

Nor should this all be about re-balancing spending. Labour needs its own distinctive account on tax. Part of this should be leading a genuinely open and far-reaching debate about what a resilient 21st century tax-base should look like, as Nick Pearce says, one better able to withstand global shocks than was the case in 2008.

Equally, it should be identifying new and progressive sources of revenue that can help support fresh needs.

To take one example, it remains something of a mystery why Labour has opted to cede the rhetorical argument about taxing wealth and property to the Lib Dems.

Any new property tax will of course be fiendishly hard to design in a way that raises serious money without being politically toxic (as the person who tried and failed to get the Blair government to reform council tax so it raised more from high-end properties I know how not to do this). All the more reason for Labour to be getting on with this hard work now rather than leaving it to others.

Yet all these longer-term policy dilemmas are overshadowed by a larger political, even emotional, challenge which will require a whole generation of Labour figures to change -- unlearn -- how they practice politics.

During the Blair-Brown era of steadily rising public expenditure, it was possible to thrive by hugging close lots of competing groups and sub-sections of the electorate. The young and the old; parents -- both working and stay-at-home; the head teacher and teaching assistant; the hospital consultant and nursing assistant. They all benefited. There were, of course, noisy battles about reform, but even the bitterest row was soothed by the salve of higher spending.

Today's Labour leadership has, perhaps not surprisingly, been caught between the realisation that this model of politics is over and an instinctive reluctance to embark on the new and far harder course -- one which accepts, sooner or later, the need for clarity about who will be the winners and losers from Labour's fiscal decisions, and the need to build widespread public consent for these choices.

This is a scary transition to make. Outraged representatives of the groups who feel let down will appear on our TV screens. It's tough to handle this in government, harder still when in opposition with few friends.

But until Labour makes this mental shift it will continue to be pushed into a largely defensive posture; defined more by its opponents than by its own positive choices.

That is a position it must break out of long before the curtain falls on 2012.

 

Gavin Kelly is the chief executive of the Resolution Foundation.

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit