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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How the mantra of centrism gave populism its big break

A Labour insider reflects on the forces behind the march of populism. 

For just under a quarter of a century, British politics has been dominated by what might be called, paradoxically, a “theology of centrism” - the belief that most people were more concerned with what works than ideology, and that politics should principally be the art of improving the delivery of public goods. It was a theology that, for all their policy differences, united Tony Blair and David Cameron. Anyone who thought electoral success could be won anywhere but from the centre was either naïve or fanatical, or both... but definitely wrong.

Now, populism is on the march across the West. In Britain, as elsewhere, the political class is unnerved and baffled.

So what happened? Partly, as with all revolutions in politics, the answer is: “events”. Unsuccessful wars, economic crashes and political scandals all played their part. But that isn’t enough of an explanation. In fact, the rise of populist politics has also been a direct result of the era of centrism. Here is what has taken place:

1. A hollow left and right

First, the theology of centrism was the culmination of a decades-long hollowing out of mainstream politics on the left and right.

In the mid-20th century, Conservatism was a rich tapestry of values – tradition, localism, social conservatism, paternalism and fiscal modesty, to name but a few. By 1979, this tapestry had been replaced by a single overriding principle - faith in free-market liberalism. One of Margaret Thatcher's great achievements was to turn a fundamentalist faith in free markets into the hallmark of moderate centrism for the next generation of leaders.

It is a similar story on the left. In the mid-20th century, the left was committed to the transformation of workplace relations, the collectivisation of economic power, strong civic life in communities, internationalism, and protection of family life. By the turn of the 21st century, the left’s offer had narrowed significantly – accepting economic liberalism and using the proceeds of growth to support public investment and redistribution. It was an approach committed to managing the existing economy, not transforming the structure of it or of society.

And it was an approach that relied on good economic times to work. So when those good times disappeared after the financial crash, the centrism of both parties was left high and dry. The political economic model of New Labour disappeared in the first days of October 2008. And when a return to Tory austerity merely compounded the problem of stagnant living standards, public faith in the economic liberalism of the centre-ground was mortally wounded.

2. Fatalism about globalisation

Second, Labour and Tory politics-as-usual contained a fatalism about globalisation. The right, obsessed with economic liberalism, welcomed globalisation readily. The left under Bill Clinton in the US and Blair in the UK made their parties’ peace with it. But globalisation was not a force to be managed or mitigated. It was to be accepted wholesale. In fact, in his 2005 Conference speech, PM Tony Blair chastised those who even wanted to discuss it. “I hear people say we have to stop and debate globalisation," he said. “You might as well debate whether autumn should follow summer. They're not debating it in China and India.” (I bet they were, and still are.) The signal to voters was that it was not legitimate to fret about the pace and consequences of change. No wonder, when the fretting began, people turned away from these same politicians.

3. A narrowing policy gap

Third, the modernising projects of Blair and Cameron ended up producing a politics that was, to use Peter Mair’s term, “cartelised”. The backgrounds, worldviews and character of party elites began to converge significantly. Both parties’ leaderships accepted the same external conditions under which British politics operated – globalisation, economic liberalism, sceptical acceptance of the EU, enthusiasm for closeness to the US on security issues. The policy space between both main parties narrowed like never before. As a result, economic and class divisions in the country were less and less reflected in political divisions in Westminster.

The impression arose, with good reason, of an intellectual, cultural and financial affinity between politicians across the main divide, and between the political class and big business. This affinity in turn gave rise to a perception of “groupthink” across the elite, on issues from expenses to Europe, and one that came with a tin ear to the concerns of struggling families. It may be misleading it is to depict all politicians as snug and smug members of a remote Establishment. Nevertheless, social and economic convergence inside Westminster party politics gave populists an opportunity to present themselves as the antidote not just to Labour or the Tories, but to conventional politics as a whole.

4. New political divides

Lastly, the populist moment was created by the way in which new electoral cleavages opened up, but were ignored by the main political parties. The last decade has seen a global financial crash that has restored economic insecurity to frontline politics. But at the same time, we are witnessing a terminal decline of normal party politics based fundamentally on the division between a centre-left and centre-right offering competing economic policies. 

Of course economics and class still matter to voting. But a new cleavage has emerged that rivals and threatens to eclipse it - globalism vs nationalism. Globalists are economically liberal, positive about trade, culturally cosmopolitan, socially progressive, with a benign view of globalisation and faith in international law and cooperation. Nationalists are hostile to both social and economic liberalism, want more regulation and protection, are sceptical of trade, see immigration as an economic and cultural threat, and have little time for the liberal international order.

The factors that drive this new electoral divide are not just about voters’ economic situation. Age, geography and education levels matter – a lot. Initially both main parties were tectonically slow to respond to this new world. But populism – whether Ukip, the SNP or Theresa May's Tories – has thrived on the erosion of the traditional class divide, and sown seeds of panic into the Labour party as it faces the prospect of sections of its traditional core vote peeling away.

Centrists thought their politics was moderate, pragmatic, not ideological. But signing up to free market liberalism, globalisation and an economistic view of politics turned out to be seen as a curious kind of fundamentalism, one which was derailed by the 2008 crisis. The exhaustion of the theology of centrism did not create populism – but it did allow it a chance to appeal and succeed.

Those on the left and right watching the march of populism with trepidation need to understand this if they are to respond to it successfully. The answer to the rise of populist politics is not to mimic it, but to challenge it with a politics that wears its values proudly, and develops a vision of Britain’s future (not just its economy) on the foundation of those values. Populists need to be challenged for having the wrong values, as well as for having anger instead of solutions.

But calling for a return to centrism simply won’t work. It plays precisely to what has become an unfair but embedded caricature of New Labour and Notting Hill conservatism – power-hungry, valueless, a professional political class. It suggests a faith in moderate managerialism at a time when that has been rejected by events and the public. And it tells voters to reconcile themselves to globalisation, when they want politicians to wrestle a better deal out of it.

Stewart Wood, Lord Wood of Anfield, was a special adviser to No. 10 Downing Street from 2007 to 2010 and an adviser to former Labour leader Ed Miliband.