Beware Labour’s deficit hawks

The party’s Hooverites are encircling Ed Miliband.

In my column this week ("Let Miliband be Miliband"), I argue that the new Labour leader has to stand up to pressure from the Tories, the media and the Blairites inside his own party, who want him to tack to the right and conform to conventional wisdom.

With the departure of his elder brother, David ("Labour's lost leader", wails the headline in the Murdoch-owned, Tory-supporting Times), the pressure on Ed to "moderate" some of his positions has intensified. "He has to move right on the deficit," a Mili-D supporter told me in Manchester, as if deficit reduction is a right/left issue. It isn't: it is a right/wrong issue.

But Labour's deficit hawks are getting more and more vocal. The outgoing shadow chancellor, Alistair Darling, warned against the party retreating from his four-year-halve-the-deficit plan at the conference in Manchester, and said Labour had to be "realistic and credible". The former City minister Kitty Ussher, now head of the think tank Demos, used a column in yesterday's Financial Times to urge Miliband to "toughen up on cuts":

The changed environment must now spur him to harden, not soften, [the Darling] position.

"Changed environment"? What could she be referring to? The rather convenient IMF report, published on Tuesday, which praised the coalition's austerity measures — despite the Fund having warned a fortnight ago that "[m]ost advanced countries should not tighten fiscal policies before 2011: tightening sooner could undermine recovery"? Perhaps she missed the economist Adam Posen's remarks this week. From the FT:

The UK faces a long period of sluggish growth, with high unemployment and falling prices, unless the authorities act quickly to stimulate the economy, an influential adviser to the Bank of England has warned.

Sounding the alarm over the possibility of years of stagnation, Adam Posen, an external member of the Monetary Policy Committee, rejected the upbeat arguments issued on Monday by the International Monetary Fund about the economy's nascent recovery.

With the prospect of a repeat of 1930s stagnation rather than 1970s inflation, Mr Posen urged the Bank to restart the money printing presses to inject more life into the economy.

Posen, rather ominously, added:

Let us not forget that it was sustained high unemployment and austerity, the sense that governments were unresponsive to average people's dire economic conditions, which led to the rise of extremist intolerant parties in pre-war Europe.

The current debate over deficit reduction is being conducted on the basis of politics, not economics. The Blairite deficit hawks, fans of triangulation, want to meet Cameron and Osborne somewhere in the "middle", regardless of the fragility of the economic recovery, the lessons of economic history or the principles of Keynesian demand management.

Their central, short-term goal is to prevent Ed Balls from securing the shadow chancellor's brief, even though Balls is the party's best economist and an unrivalled attacker of the Tories (see Gove, Michael). His Bloomberg speech, outlining a progressive and Keynesian alternative to the coalition's cuts agenda, has been hailed by commentators and economists from across the spectrum.

In fact, despite whispers about him lacking "credibility" on the deficit, Balls's position is backed by the Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz, the Financial Times duo Martin Wolf and Samuel Brittan, and the governor of the US Federal Reserve (and scholar of the Great Depression), Ben Bernanke. Are they not "credible" enough for the British commentariat or the Labour right? Personally, I think the words "credible" and "credibility" should be banned from all discussions of the deficit.

(On a side note, on the subject of language, before Labour members or supporters get upset with me for using the derogatory phrase "Hooverites" in the standfirst — above — I should point out that I'm quoting Joe Stiglitz here. He told me, in an interview back in February, that deferring to the credit ratings agencies and "scaremongering" about the debt marked a victory for the "Hooverites" over the "Keynesians".)

I was delighted, however, to see Ed M tell Channel 4 News last night that he would want to tax more than the Darling plan allows for, and it is important that the debate over deficit reduction revolves not just around the timing for cutting, halving or eliminating the state's overdraft, but also the preferred ratio of spending-cuts-to-tax-rises. Ed Balls was the first Labour leadership candidate to argue that Labour's plan should be based on a 50:50 ratio between the two and to point out that Norman Lamont and Kenneth Clarke used a similar ratio when the Tories were cutting the deficit in the 1990s.

I happen to believe that Balls is the best candidate for the job of shadow chancellor (and I made my case for him in my column last week). Others have suggested Yvette Cooper, who is also a strong candidate with an impressive CV. But, outside of this particular married couple, who are the other candidates for the job? Are there any? And will they help Labour stand up to the economic illiteracy of the coalition's fiscal sadists?

Ed M — over to you.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Labour's unstoppable force meets its immovable object

Team Corbyn are confident. But so are their opponents.

If you come at the king, you best not miss. And boy, have they come at him: over 40 resignations from the opposition frontbench and a motion of no confidence in Jeremy Corbyn’s leadership that both loyalists and rebels expect to pass easily.

What happens next? The ruling executive of Momentum, the organising force behind Jeremy Corbyn’s supporters in the party grassroots, met Corbyn in his office late last night. It would be overstating it to say that the mood was jubilant but Corbyn and his allies are confident of victory in the struggle for supremacy. “Game on,” texted one senior figure. “He won’t stand down,” another told me, “He feels he owes it to the membership to let them decide.”

Within Team Corbyn, they remain convinced that the shadow cabinet “are going to war without an army”, in the words of one insider. Others are already looking forward to the policy conference of Labour and Britain’s largest trade union, Unite, where there is a chance the union may adopt a policy of supporting mandatory reselection of Labour MPs.

Are they right? Having called and spoken to party members, it is certainly clear that Corbyn’s standing among the membership is not quite as high as it once was.

But members are unclear what they want next – several mentioned Keir Starmer, although my instinct that is largely because, as one member conceded, he is still very much a “blank slate” on which the hopes of the party’s electorate can be projected. What most want is someone who would retain much of the politics but with greater competence – the Vice News documentary seems to have done more damage than the referendum on the whole – and without the thirty years in politics for the right-wing press to pick over. The difficulty is that it is hard to see a politician in the parliamentary Labour party answering to that description or even close to it. While for the rebels, finding a winner is no longer the priority, surviving a snap election in October is, loyalists in the PLP and the grassroots are either unconvinced that the result will be heavy defeat, or unconvinced that any of the replacements would do better.

The difficulty for Corbyn’s critics is, rather like Labour under Ed Miliband, although they might be the repository for people’s irritation and uncertainty, there are few making a positive choice to vote for any of the available candidates. My instinct is, if Corbyn is on the ballot, the polls might show a tighter picture, he might have a tougher time on the campaign trail that he did last time, and he might have a closer fight as far as constituency nominations were concerned, but he would ultimately win, and win easily.

That’s before you get into Momentum’s ability to expand the electorate further.  Although appearing at last night’s rally was criticised by some journalists and cost Corbyn’s team at least one frontbencher, who, while keen to avoid prolonging the fighting, didn’t want to endorse the attacks on his colleagues in the parliamentary party, ultimately the petitions in support of Corbyn and the impromptu rally have given them more data to go out and recruit people to vote in the next leadership election, more than making up for any loss of support within the party-as-it-is.

But – and it’s a big “but” – I’m not convinced that Corbyn will make it to the ballot.

The party’s legal advice, from the party’s lawyers, GRM Law, is that Corbyn will have to secure 50 nominations to make the ballot, just as any challenger will. My feeling, with MPs of all parties convinced that there will be an election in October as soon as the new Conservative leader is in place, is that pressure from activists to nominate Corbyn will be less fruitful than it was in 2015. (That said, Labour MPs are skittish.) 

The Labour leadership themselves have obtained legal advice showing the reverse from Doughty Chambers. But whichever way the NEC rules, neither side will be able to take it to the courts. Most legal professionals estimate that Labour, like a trade union or a private members’ club, is exempt. “You accept the rules of the club when you join the club,” and that’s the end of it. My impression is that the judiciary would be reluctant to get involved.

The difficulty with predicting what happens next is it brings two of Labour’s iron laws into direct conflict: Labour never gets rid of its leader, and Tom Watson always wins. And I don’t think anyone is sure which of those laws is going to end up broken.

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.