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."

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

Photo: Getty Images
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I'm far from convinced by Cameron's plans for Syria

The Prime Minister has a plan for when the bombs drop. But what about after?

In the House of Commons today, the Prime Minister set out a powerful case for Britain to join air strikes against Isil in Syria.  Isil, he argued, poses a direct threat to Britain and its people, and Britain should not be in the business of “outsourcing our security to our allies”. And while he conceded that further airstrikes alone would not be sufficient to beat Isil, he made the case for an “Isil first” strategy – attacking Isil now, while continuing to do what we can diplomatically to help secure a lasting settlement for Syria in which Assad (eventually) plays no part.

I agreed with much of David Cameron’s analysis. And no-one should doubt either the murderous barbarism of Isil in the region, or the barbarism they foment and inspire in others across the world.  But at the end of his lengthy Q&A session with MPs, I remained unconvinced that UK involvement in airstrikes in Syria was the right option. Because the case for action has to be a case for action that has a chance of succeeding.  And David Cameron’s case contained neither a plan for winning the war, nor a plan for winning the peace.

The Prime Minister, along with military experts and analysts across the world, concedes that air strikes alone will not defeat Isil, and that (as in Iraq) ground forces are essential if we want to rid Syria of Isil. But what is the plan to assemble these ground forces so necessary for a successful mission?  David Cameron’s answer today was more a hope than a plan. He referred to “70,000 Syrian opposition fighters - principally the Free Syrian Army (FSA) – with whom we can co-ordinate attacks on Isil”.

But it is an illusion to think that these fighters can provide the ground forces needed to complement aerial bombardment of Isil.  Many commentators have begun to doubt whether the FSA continues to exist as a coherent operational entity over the past few months. Coralling the myriad rebel groups into a disciplined force capable of fighting and occupying Isil territory is a heroic ambition, not a plan. And previous efforts to mobilize the rebels against Isil have been utter failures. Last month the Americans abandoned a $500m programme to train and turn 5,400 rebel fighters into a disciplined force to fight Isil. They succeeded in training just 60 fighters. And there have been incidents of American-trained fighters giving some of their US-provided equipment to the Nusra Front, an affiliate of Al Qaeda.

Why has it proven so hard to co-opt rebel forces in the fight against Isil? Because most of the various rebel groups are fighting a war against Assad, not against Isil.  Syria’s civil war is gruesome and complex, but it is fundamentally a Civil War between Assad’s forces and a variety of opponents of Assad’s regime. It would be a mistake for Britain to base a case for military action against Isil on the hope that thousands of disparate rebel forces can be persuaded to change their enemy – especially when the evidence so far is that they won’t.

This is a plan for military action that, at present, looks highly unlikely to succeed.  But what of the plan for peace? David Cameron today argued for the separation of the immediate task at hand - to strike against Isil in Syria – from the longer-term ambition of achieving a settlement in Syria and removing Assad.  But for Isil to be beaten, the two cannot be separated. Because it is only by making progress in developing a credible and internationally-backed plan for a post-Assad Syria that we will persuade Syrian Sunnis that fighting Isil will not end up helping Assad win the Civil War.  If we want not only to rely on rebel Sunnis to provide ground troops against Isil, but also provide stable governance in Isil-occupied areas when the bombing stops, progress on a settlement to Syria’s Civil War is more not less urgent.  Without it, the reluctance of Syrian Sunnis to think that our fight is their fight will undermine the chances of military efforts to beat Isil and bring basic order to the regions they control. 

This points us towards doubling down on the progress that has already been made in Vienna: working with the USA, France, Syria’s neighbours and the Gulf states, as well as Russia and Iran. We need not just a combined approach to ending the conflict, but the prospect of a post-war Syria that offers a place for those whose cooperation we seek to defeat Isil. No doubt this will strike some as insufficient in the face of the horrors perpetrated by Isil. But I fear that if we want not just to take action against Isil but to defeat them and prevent their return, it offers a better chance of succeeding than David Cameron’s proposal today. 

Stewart Wood is a former Shadow Cabinet minister and adviser to Ed Miliband. He tweets as @StewartWood.