Memo to Ed and Ed: ignore the call to embrace austerity

The New-Labour, me-too approach on cuts is a political and economic dead end.

Jim Murphy, long regarded as the leading Blairite in Ed Miliband's shadow cabinet, has attracted a handful of headlines today with his Guardian interview, in which he says Labour must have "genuine credibility" on the economy and reveals that he would accept £5bn of Tory defence cuts.

The shadow defence secretary tells Nick Watt:

It is important to be both credible and popular when it comes to defence investment and the economics of defence. There is a difference between populism and popularity. Credibility is the bridge away from populism and towards popularity. It is difficult to sustain popularity without genuine credibility. At a time on defence when the government is neither credible nor popular it is compulsory that Labour is both.

"Genuine credibility". A phrase right up there with Paul Krugman's "Very Serious People". Don't get me wrong. I support cuts to the UK's defence budget. And, of course, credibility is self-evidently important. But Murphy and his fellow Labour deficit hawks have outsourced the definition of credibility to the Tory party, the right-wing press and neoclassical economists. After all, is "genuine credibility" secured through growth of 0.5 per cent? Or unemployment at 2.6 million? Yet, bizarrely, despite the economy tanking, and Osborne's deficit-reduction plans falling apart, an increasing number of New Labour figures are buying into the Tory narrative on the deficit and embracing their right-wing opponents' monomaniacal obsession with deficit reduction over economic growth and job creation.

As Watt notes:

The timing of Murphy's intervention is significant in domestic and international terms. On the domestic front it comes just as key Labour figures express doubts about the party's economic strategy. These concerns were highlighted in a pamphlet by Lord Mandelson's Policy Network think tank last month which criticised the "vagueness" of Labour's deficit reduction plans.

But embracing austerity is bad politics and bad economics. It is a strategy (if one can call it that despite the fact that I have yet to hear how it will help Labour present a convincing and appealing alternative (yes, alternative!) to the Tories' failed austerity agenda) premised on a myth: that Labour went into the last general election opposed to cuts and committed to higher levels of public spending. This is nonsense. Alistair Darling's plan to halve the deficit over four years was enshrined in the Labour manifesto - to the irritation of some on the centre-left (like Polly Toynbee, David Blanchflower and, er, me!) In fact, Darling went as far as to claim that Labour planned to make "deeper and tougher" cuts than Margaret Thatcher made in the eighties. It's a fiscal strategy that was then adopted by the two Eds, Balls and Miliband, despite the fact that it muddied the ideological and policy water between the Conservatives and Labour and has since enabled coalition ministers to defend their draconian austerity measures with a version of: "Well, Labour's own figures show they would have had to cut almost as much as we are."

If the two Eds, egged on by the likes of Murphy, now truly believe Labour can win the economic argument with a "we want cuts too, but not just yet and not as many", and by going beyond Darling, they are living in a fantasy world. Politically, austerity-lite won't cut it with the voters. Economically, it won't work in spurring much-needed growth (see here, here, here and here). It is time, as a wise man once said, for Labour to say that deficits aren't "immoral" and make the argument that "sometimes deficits are necessary to serve the society you live in". (Interestingly, the wise man in question was David, not Ed, Miliband, during the Labour leadership contest of 2010).

In fact, in today's Guardian panel on "what Ed needs to do now", columnist Zoe Williams hits the nail on the head:

The problem with Ed Miliband's opposition is not that they won't admit their past mistakes but that they don't articulate properly either their mea culpas or their triumphs. A simple graph, rendered in word form (preferably spoken by Miliband himself, rather than Balls) would demonstrate that there was no systemic deficit problem before the crash, and the upkick that made the spending look dangerous was due to the banking crisis. Then they could legitimately apologise for failing to regulate banking; point out that the coalition hasn't regulated it either and we're still subject to the same risks; and mention, furthermore, that Gordon Brown averted disaster over that period. . . If they won't make that case, they are just left tugging at the threads of the austerity drive, which comes across as unconstructive and watery.

To abandon opposition to cuts, as those cuts begin to bite, as voters back a slowdown in the deficit-reduction programme and as more and more data shows that austerity is killing the British economy, is just madness. The New-Labour, me-too approach on cuts is a political and economic dead end and, in my view, best ignored.

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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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.