Osborne is losing political control of the economic debate

The once mighty 'Plan A' is reduced to a pile of cold pasties.

In today’s Telegraph, Liam Fox has written a brisk précis of the analysis often heard on the right wing of the Tory party about why the economy isn’t growing. The problem, in the former Defence Secretary’s view, is a lack of rigour in pursuing supply side reforms.
 
Chiefly, that means aggressive labour market deregulation. The theory is that rules protecting employees’ rights are deterring companies from taking on staff. Relaxing those rules - making it easier to sack people - is thus supposed to lubricate private sector job creation. This was the essential thrust of a report commissioned last year by Downing Street from Adrian Beecroft, a venture capitalist (and Tory party donor).
 
The Beecroft report got bogged down in coalition warfare as Lib Dems briefed heavily against it – suggesting it was a shoddy piece of work with recommendations that were mostly peripheral to the task of rebooting the economy. Fox takes a swipe at Nick Clegg’s party for “intuitive left-wing opposition to supply side reform”.
 
It is worth recalling at this point what Lib Dem Energy Secretary Ed Davey said in a New Stateman interview on this subject recently.  (He was the employment minister at the time of the most ferocious rows over Beecroft):

I never bought the argument that our labour market was the most regulated there is. All the evidence shows we have one of the least regulated labour markets in the world.

One reason this issue ignites internal coalition tension is that it becomes a proxy for pro- and anti-European feeling. The right wing of the Conservative party sees the EU as an engine of pernicious bureaucracy and regulation. Eurosceptics put setting employment rules at the top of their list of powers to be “repatriated”. The Lib Dems are desperately trying to steer the government into a more consensual approach in Brussels and find all talk of repatriation unhelpful.
 
But there is a different political problem for David Cameron and George Osborne contained in Fox’s intervention. The news of a double dip recession has emboldened both the left and right in their conviction that the coalition’s current course is failing. Naturally, they have entirely different diagnoses and as a sense of urgency - bordering on panic – takes hold, that divergence will become more extreme. The great danger for the Prime Minister and the Chancellor (and, by association, for Nick Clegg and Danny Alexander) is that they will lose control of the economic debate entirely.
 
As the Tory backbenches get frothy about bolder supply side measures and deeper cuts, Labour bangs its Keynesian drum for a change of course in the opposite direction. That leaves Downing Street holding a bunch of discredited budget measures that no one thinks will make the blindest bit of difference to growth. Plan A is reduced to a pile of cold pasties.

 

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.