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.

Getty
Show Hide image

Charlottesville: a town haunted by the far right

Locals fear a bitter far right will return.

On 12 August, a car ploughed down pedestrians in the street where I used to buy my pecan pies. I had recently returned to London from Charlottesville, Virginia – the scene of what appears to have been an act of white supremacist terrorism – having worked and taught at the university there for four years. While I unpacked boxes of books, the streets I knew so well were full of hate and fire.

The horror began on the evening of Friday 11 August, when thugs with torches marched across the “Lawn”. Running through the heart of the university, this is where, each Halloween, children don ghoulish costumes and trick-or-treat delighted and generous fourth-year undergraduates.

But there were true monsters there that night. They took their stand on the steps of the neoclassical Rotunda – the site of graduation – to face down a congregation about to spill out of St Paul’s Episcopal opposite.

Then, on Saturday morning, a teeming mass of different groups gathered in Emancipation Park (formerly Lee Park), where my toddler ran through splash pads in the summer.

We knew it was coming. Some of the groups were at previous events in Charlottesville’s “summer of hate”. Ever since a permit was granted for the “Unite the Right” march, we feared that this would be a tipping point. I am unsure whether I should have been there, or whether I was wise to stay away.

The truth is that this had nothing to do with Charlottesville – and everything to do with it. From one perspective, our small, sleepy university town near the Blue Ridge Mountains was the victim of a showdown between out-of-towners. The fighting was largely not between local neo-Nazis and African Americans, or their white neighbours, for that matter. It was between neo-Nazis from far afield – James Alex Fields, Jr, accused of being the driver of the lethal Dodge Challenger, was born in Kentucky and lives in Ohio – and outside groups such as “Antifa” (anti-fascist). It was a foreign culture that was foisted upon the city.

Charlottesville is to the American east coast what Berkeley is to the west: a bastion of liberalism and political correctness, supportive of the kind of social change that the alt-right despises. Just off camera in the national newsfeeds was a banner hung from the public  library at the entrance of Emancipation Park, reading: “Proud of diversity”.

I heard more snippets of information as events unfolded. The counter-protesters began the day by drawing on the strength of the black church. A 6am prayer meeting at our local church, First Baptist on Main (the only church in Charlottesville where all races worshipped together before the Civil War), set the tone for the non-violent opposition.

The preacher told the congregation: “We can’t hate these brothers. They have a twisted ideology and they are deeply mistaken in their claim to follow Christ, but they are still our brothers.” Then he introduced the hymns. “The resistance of black people to oppression has only been kept alive through music.”

The congregation exited on to Main Street, opposite my old butcher JM Stock Provisions, and walked down to the statue of Meriwether Lewis and William Clark – the early 19th-century Bear Grylls types who explored the west. They went past Feast! – the delicacy market where we used to spend our Saturday mornings – and on to the dreamy downtown mall where my wife and I strolled on summer evenings and ate southern-fried chicken at the Whiskey Jar.

The permit for the “protest” was noon to 5pm but violence erupted earlier. Between 10.30am and 12pm, the white supremacists, protected by a paramilitary guard, attacked their opponents. As the skirmishes intensified, police were forced to encircle the clashing groups and created, in effect, a bizarre zone of “acceptable” violence. Until the governor declared a state of emergency, grown men threw bottles of piss at each other.

At noon, the crowd was dispersed and the protesters spilled out into the side streets. This was when the riot climaxed with the horrific death of the 32-year-old Heather Heyer. Throughout Saturday afternoon and evening, the far-right groups marauded the suburbs while residents locked their doors and closed their blinds.

I sat in London late into the night as information and prayer requests trickled through. “There are roughly 1,000 Nazis/KKK/alt-right/southern nationalists still around – in a city of 50,000 residents. If you’re the praying type, keep it up.”

No one in Charlottesville is in any doubt as to how this atrocity became possible. Donald Trump has brought these sects to group consciousness. They have risen above their infighting to articulate a common ground, transcending the bickering that mercifully held them back in the past.

In the immediate aftermath, there is clarity as well as fury. My colleague Charles Mathewes, a theologian and historian, remarked: “I still cannot believe we have to fight Nazis – real, actual, swastika-flag-waving, be-uniformed, gun-toting Nazis, along with armed, explicit racists, white supremacists and KKK members. I mean, was the 20th century simply forgotten?”

There is also a sense of foreboding, because the overwhelming feeling with which the enemy left was not triumph but bitterness. Their permit had been to protest from noon to 5pm. They terrorised a town with their chants of “Blood and soil!” but their free speech was apparently not heard. Their safe space, they claim, was not protected.

The next day, the organiser of the march, Jason Kessler, held a press conference to air his grievances. The fear is that the indignant white supremacists will be back in greater force to press their rights.

If that happens, there is one certainty. At one point during the dawn service at First Baptist, a black woman took the stand. “Our people have been oppressed for 400 years,” she said. “What we have learned is that the only weapon which wins the war is love.”

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear