How Labour can clean up Osborne's mess

The party must make national renewal its essential governing project.

George Osborne has messed the economy up. This might be a somewhat laconic summary of the latest IMF report into the state of the UK economy, but it isn’t a million miles from the truth. The overly rapid imposition of fiscal tightening has led to recession, which in turn means that borrowing is increasing, not falling. Cue ominous orchestral strings.

Yet as George Eaton argued yesterday, Osborne’s failure - and it is an abject, historic, world-class failure – has difficult political consequences. The Chancellor's failure means the next election will be fought under economically cloudy skies. The economy will probably be growing anaemically by 2015, but there will be pressure on living standards and stubbornly high unemployment. Our national debt will still be rising and the necessary return to fiscal balance will be several years off.

So the government has quietly kicked rebalancing a little longer down the road. The IMF reminds us that the government has already announced "further, unspecified consolidation in 2015-17.". That’s the £10 billion of further welfare cuts the government has "planned" for after the next election. The IMF think growth will be slower than the Office for Budget Responsibility (OBR) does, and deficit targets missed, which means even more "unspecified consolidation" will eventually be needed. To this gloom, the OBR adds that an aging population means return to pre-crisis levels of debt will require additional spending cuts or tax rises worth some £17 billion a year[1] just to return to the debt status quo ante.

These problems are going to land right in the lap of the next government. So what can Labour offer a nation facing weak growth, high debt and demographic cost pressures?

One reaction to the triple squeeze a Labour government would face is to deny that deficit reduction will be needed, that we can find a path to growth in the rejection of spending restraint, or "austerity-lite". In the short-term, that is absolutely the right approach. Debt is historically cheap, and rates are low because money is seeking out the safehouses of government securities. Unfortunately, Labour will not be governing in the short-term. Come 2015, while fiscal consolidation might be slowed, or even temporarily reversed, at some point it will need to be resumed – at least if we are to remain good Keynesians. So in order to create the space we need to invest for growth, we will need to bind ourselves tight to medium-term deficit reduction.

Another argument might be that Labour should support deficit reduction, but primarily through tax increases. If we were to take the current projections, we’d be looking at an immediate £10 billion in tax increases to fund welfare, plus whatever action we took on medium term debt, plus any other cuts we sought to reverse or delay. Then there’s social care, which might need another £10 billion or so. Yet as those dangerous right wingers at the Fabians have pointed out, there is little public appetite for tax rises. Gulp.

I believe neither argument is wholly convincing because neither postponing the debt reckoning nor increasing taxes to preserve services, can renew our national economy. They are responses to problems, not a search for a solution. Instead, our political focus must be directly on the need for the recovery of our national productive capacity.  Naturally, that means we can’t afford the risk of a fiscal event, or to waste money on financing extended debt levels for longer than strictly necessary. So a steady return to fiscal balance is vital. But as well as closing the existing deficit, we also have to do new things to support growth- such as a National Investment Bank, infrastructure, R&D, and education.

Unfortunately, few of these things are free[2]. It is disturbing to think that the key to Britain’s long-term growth is a plan for national renewal which will cost more of the money we already don’t have. No wonder the latest buzz phrase among left-wing wonks is "switch spend" which translates as "cut services to fund investment".

The next Labour government won’t be able to choose between higher taxes and cuts if it is to slowly reduce the deficit, deal with demographic pressures and deliver sustainable growth. Instead, it will have to do both. But how can such a programme ever be sold to an already sceptical electorate?

I believe we need to make national renewal our essential governing project. Our argument must be that national renewal only works if pursued for the long-term and alongside a politics of common sacrifice. The problem for this government is that they do not believe in restraint in any terms other than for the state. If you have wealth, or power, or privilege, restraint is for other people. Labour can offer a distinctive message. Yes, the next few years will be tough if we fight back to economic strength. But we can only do so if all parts of society contribute.

This requires that we change too. If we are to talk of a common purpose, it must demonstrate that restraint is broadly shared. If the risk for the Tories is that they are too indulgent to the wealthy few, then for the left it is that we are unable to be frank with those the trade unions represent. This strategy is risky, I freely admit. It doesn’t sit well with progressives to promise pain today but joy deferred. It will be hard to make the argument to Unison and the GMB that to support long-term growth requires short-term restraint in public service budgets.

Yet the reality is that a Labour government will face sharp constraints, that we need long term sustainable private sector growth to fund our social aims, and that future demographic pressures require more fiscal restraint, not less. That means that a future Labour government would have to make such arguments, like it or not.

Today, politics often sounds tinny and inadequate to the challenges we face.  Perhaps the key to changing that is to frankly recognise the sea of troubles we face, set a great national ambition, and argue that to achieve such may be difficult, but is also worthy. Shared sacrifice, national renewal, common purpose. Maybe it’s just me, but I can see that catching on after selfish Toryism fails.



[1]  "we calculate the additional fiscal tightening necessary from 2017-18 to return PSND to its roughly pre-crisis level of 40 per cent of GDP in 2061-62, as well as that necessary to keep it at the level we expect at the end of our medium-term forecast, namely 75 per cent of GDP, again in 2061-62. Under our central projections, the government would need to implement a permanent tax increase or spending cut of 1.1 per cent of GDP (£17 billion in today’s terms) in 2017-18 to get debt back to 40 per cent and 0.3 per cent of GDP (£5 billion in today’s terms) to have it at 75 per cent."

http://cdn.budgetresponsibility.independent.gov.uk/FSR2012WEB.pdf

P13 Para 52-54

As the OBR says, this figure only gets bigger if the government misses its debt targets for 2016-17.

 

[2]  Though Gregg McClymont’s work on pensions charges shows that not all progressive reforms cost money. The same is true of other consumer and market regulation issues, many of which, ironically enough need to be imported from that bastion of neo-liberalism – the USA.

 

A future Labour government would face tight economic constraints. Photograph: Getty Images.

Hopi Sen is a former head of campaigns at the Parliamentary Labour Party. He blogs at www.hopisen.com.

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Mister Lizard is not at home to bailiffs – he is eating salmon pâté by the river

Why is it that when people answer the question “What’s the worst thing anyone’s ever said to you?” in the Guardian questionnaire they never say, “You’ve been served”?

Summer’s nearly over. I look at the angle of the sunlight as it strikes the back terrace of the Hovel. I have been here long enough to use the terrace as a gnomon marking the passage of the year. I need, like the protagonists of Withnail and I, to go to the countryside to rejuvenate.

Last week when the Perseids were meant to be in full flow I asked frantically on a social medium for people to chum me along on a midnight walk on Hampstead Heath. In the end my new friends A— and her husband, C—, together with his new friend (whose initial I have forgotten, but he is Australian, if that helps), stepped up to the plate and after a couple at the Flask we went on a wide-ranging tour, which was a bust as far as seeing meteors – or my favourite tree – went, but was still hugely enjoyable. At about 2 am they packed me into an Uber and I went home happy, but I still felt as if I could do with more countryside.

The next few days made me even more anxious to get out of London. There are ominous signs that some serious roadworks are going to be taking place outside my bedroom window any day now. A bailiff came and rang the doorbell and I didn’t have the heart, or the nerve, to say that Nicholas Lezard was not at home at the moment and, is, in fact, on a walking tour of Patagonia now I come to think of it, due back some time next year. I just took the piece of paper into my hands as if it were a chicken come home to roost.

The previous day, presumably the same bailiff had come round and asked if Mr Lizard was in, and my housemate gallantly – and quite truthfully – said “no”. (Why is it that when people answer the question “What’s the worst thing anyone’s ever said to you?” in the Guardian questionnaire they never say, “You’ve been served”? Maybe it’s because they haven’t ever been.) In addition, as I said last week, the cleaning lady is on holiday and the Hovel is starting to look distinctly seedy.

So, then I get a call from a person who once featured quite prominently in this column, some time ago. This person is bored and wants me to go to his or her town and alleviate his or her boredom. This person and I parted company in circumstances that were far from ideal some time ago, and only recently have diplomatic relations been resumed.

It is too late, I say, for me to get on the train now; but when I have reviewed the book I am meant to be reviewing, I will hop on the train tomorrow around noon. And so I do, despite some monkey business from the departures board at King’s Cross, which tells passengers the 12:44 has been cancelled, then hasn’t been, then has, then hasn’t after all, while the 12:14 has slipped away like a thief in the night without telling anyone it was doing so.

I wonder if my return to the town of ——— is wise. As a dog returneth to its vomit, so doth a fool return to his folly. And the burnt hand fears the fire. Look, I say to myself, all we’re doing is going to have a picnic by the river. As we buy our supplies, the stallholder at the market asks if I am my companion’s husband. “No, he’s my picnic buddy,” he or she replies. “Never heard it called that before,” says the stallholder.

And the day passes perfectly pleasantly. We have two bottles of wine, cheese and smoked salmon pâté with crusty bread. People in punts drift past us, with varying degrees of competence. I remember it is A-level results day and call the eldest boy to ask how he’s done. He’s done well enough, it turns out, to get a place at university, though he feels obliged to point out that his results came in exactly a year ago. This is the kind of thing that happens when the number of children you have exceeds your mental bandwidth.

Later on, a porter from the college behind which we are picnicking asks me if I am a member, or an alumni. “Alumnus,” I correct him gently, hoping that this should establish my credentials. He asks for my name, and he radios the porters’ lodge to check my veracity. For some reason it takes him several goes to get my name right.

One of these goes is “Lizard”. We offer him some cheese, but he refuses, on the grounds that he has just had a banana and a cup of tea. I could live in a guest room here, I reflect, at not much higher rent than one pays in London. And the beauty of it is that the police, and presumably bailiffs, have to ask permission to go through the gates. 

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser