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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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.