The revolt against Osborne grows

Lib Dem MPs join economists in calling for a change of course.

Our exclusive story on how once supportive economists have turned against George Osborne has made the front page of today's Guardian, with the rest of Fleet Street, including the Mail and the Telegraph, also following up the piece, which appears in full in this week's magazine.

The Guardian leads on this week's New Statesman cover story.

And there's more bad news for Osborne today. The FT's Kiran Stacey reports that Lib Dem MPs are also now urging Osborne to take advantage of the UK's record low borrowing rates and stimulate growth through higher capital spending. John Pugh, the co-author of the party's 2010 economic policy, tells the paper:

We need to look again very carefully at the implications of the sharp reduction we have seen in capital expenditure.

There are a fair number of people who think that if we returned to the plans as conceived by Vince Cable . . . we would be in a slightly healthier position than we are.

Pugh is right. Osborne's decision to reduce capital expenditure - the most valuable spending, according to the OBR - by 48% (£24.3bn) is one of the main reasons why the UK, with the exception of Italy, is the only G20 member in recession.

When it was pointed out to Pugh that it would be difficult for the Chancellor to perform such a U-turn, he rightly replied:

The situation is serious enough now for people not to be bothered about what you call the plan.

Two other MPs - Annette Brooke and John Leech - make similar calls, and a senior economic adviser to the party comments: "We may have to resort to emergency measures to stimulate demand. We have already let the timetable on eliminating the deficit slip: we may have to do that again."

Perhaps most significantly, Stacey reports that party president Tim Farron is being urged by the Lib Dem leadership to call for deficit-funded spending "in order to give Nick Clegg, the deputy prime minister, a mandate to argue for it at the top of government."

The Lib Dems' restlessnes is unsurprising. As even the IMF has stated, there is no evidence that a reduced pace of deficit reduction would trigger a rise in British bond yields. With investors increasingly reluctant to lend to eurozone countries, the UK is, as Osborne has observed, a "safe haven". Yet, for no other reason other than political pride, the Chancellor is unwilling to change direction. Borrowing for growth would be a tacit admission that his nemesis, Ed Balls, was right and he was wrong. But until Osborne is prepared to take this step, there is no prospect of recovery, for either the economy or his party.

George Osborne is under increasing pressure to stimulate growth through higher infrastructure spending. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

LEON NEAL/GETTY IMAGES
Show Hide image

To win power, Labour needs to start talking about giving it away

From the House of Lords to First Past the Post, the Labour Party must seek reforms to return power to the people.

The signs were there in 2010. The British electorate failed to give any single party a majority in the Commons, delivering what amounted to a vote of no confidence in Westminster. Since then, voters have taken every opportunity to inform to those sitting on the green benches that they are not content.

The independence referendum in Scotland was closer than many had predicted. The Labour leadership election [in 2015] brought another rejection of the Westminster way of doing things when hundreds of thousands joined the party to elect a leader who opposed the New Labour platform. But David Cameron assumed that the Conservative Party was immune to this spirit of insurgency. Confident that he and his chums could convince the electorate of the wisdom of EU membership, despite decades of anti-Brussels headlines, he rashly called a referendum without considering the implications of defeat.

As with the election of Jeremy Corbyn, those who felt that their voice was no longer heard at Westminster saw the referendum as an opportunity to have their say. Driven by a dispiriting sense that they had lost control of their fate, to the extent that they felt this was no longer their country, they voted to make the rest of us feel the same.

The urge to dismiss this as nothing more than spite should be resisted. These voters feel vulnerable. If we are to believe the majority of them when they say they are not racists – and I do – then we must accept that their complaints about immigration mask other concerns. My hunch is that if they were asked to rank security of employment, of housing and of health care in order of importance, each of these would be a higher priority than security of our borders. And the terrible irony is that a Brexit driven by free-market libertarians is likely to create an economy that is even less secure for low-paid workers and those who rely on support from the state.

If the Labour Party hopes to engage with those vulnerable voters, it needs to win back trust by first showing that it trusts the people. Labour should make accountability its watchword, giving all employees statutory rights, especially those kept on precarious terms by profiteering corporations. A reformed voting system would stop parties listening only to the voices of those living in key marginals. A democratic upper house would offer another opportunity for engaging with people from beyond the Westminster bubble. Devolving power to the English regions, giving them the final say over housing, employment and health care, would allow voters to take back control over their lives and also create a better balance between London and the rest of the country.

To win power, Labour first needs to start talking about giving it away.

Billy Bragg is a musician and campaigner

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition