Credibility is Labour leader’s hygiene factor

New leader needs to convince people that the deficit was not mismanagement but a way of avoiding a d

Pat McFadden MP was absolutely right to argue today that if Labour only opposes cuts there is a "danger of being tuned out by the electorate". But in many ways, the electorate has tuned Labour out already and the challenge is to tune it back in.

Being credible on the deficit is now a hygiene factor for Labour's next leader. All the candidates, and Labour's frontbenchers, are leading opposition to the unfairness of the Budget and the cuts to come in October's Spending Review. This is politically necessary, but not politically sufficient. Labour will get elected again, not on the determination of its opposition, but on the credibility of its alternative.

The perceived wisdom of the 1992 shadow Budget is that setting out proposals in opposition for necessary tax rises -- or indeed, spending cuts -- is political suicide. But it was a significant move this week from Ed Balls that started this debate, after he told the BBC's Laura Kuenssberg that it was a "mistake" for Labour to promise to halve the deficit in four years.

It was a major scoop for her, but did he mean to go public with this view? He hasn't yet said what his alternative would be and so has left himself a credibility gap for the other candidates to probe at the next hustings, in London this Friday.

The dilemma remains: how does Labour prove credibility without being explicit about either alternative cuts or tax rises? It almost certainly can't be done.

At the end of last week, Ed Miliband said Labour shouldn't be locked into the 2:1 ratio for cuts and tax rises, as stated in Labour's manifesto. He said the new leader should outline cuts by the time of October's Spending Review and suggested that tax rises play a bigger role. Andy Burnham has since joined the call for more tax rises and has been bold and consistent in arguing that raising the NHS budget while cutting the social care budget is a mistake.

These are more forward-looking attempts at gaining distinction and they do help move Labour on from what felt, at the time, like a credible deficit reduction plan on page 6 of Labour's manifesto. Page 6 was the core script for all Labour spokespeople during the election, and in interview after interview, Ed Balls and others made it sound credible. Having lost an election so dominated by the Tory campaign against a National Insurance rise, Labour now needs a new deficit reduction plan that is not politically tarnished.

David Miliband has suggested doubling the banking levy and introducing a "mansion tax". Ed Balls would start the 50p income-tax rise at £100,000 and Ed Miliband would make it permanent. Yet all the candidates are struggling for credibility, because these tax rises don't add up to the spending cuts they are seeking to prevent and the VAT hike they voted against last night. Demos has costed an alternative, but it is not the only option.

McFadden is right that the Tories and Lib Dems want Labour to "retreat to its comfort zone" so that they can argue Labour is responsible for the deficit and that "they alone are capable of facing up to Britain's problems".

Labour's next leader needs to win two arguments at the same time. The first is that the deficit was not mismanagement, but a decision taken to prevent recession turning to depression. The second is that Labour's new leader can now be trusted to reduce it. The public will not accept one without the other.

Richard Darlington is head of the Open Left project at Demos.

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Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

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No, Matteo Renzi's referendum isn't Italy's Brexit

Today's Morning Call. 

The European Union saw off one near-death experience yesterday, as Alexander van der Bellen - a Green running under independent colours - saw off Norbert Hofer, the far-right candidate, taking 53 per cent to 47 per cent. 

"Turn of the tide: Europeans hail Austrian far-right defeat" is the Guardian's splash, while "Austria says NEIN to far-right" is the Metro's take.

It's a reminder that the relentless march of the far right is not as irresistible as the Le Pens of the world would like to think, and, for the left, a rare brightspot in a year of seemingly unbroken retreat, albeit by a margin that is too close for comfort. 

But on the other side of the Alps, things are not looking so great. Italian voters have rejected Italian PM Matteo Renzi's proposed constitutional reforms in a landslide, resulting in Renzi's resignation. (For a good primer on who Renzi is or rather was, Joji Sakurai wrote a very good one for us a while back, which you can read here)

"Europe in turmoil as Italian PM is defeated" is the Times splash. It has many worrying that Italy made be headed out of the Euro at worst and trigger another financial crisis in the Eurozone at best. Over at the Spectator, James Forsyth suggests that this will make the EU27 reluctant to put the squeeze on the City of London, which is still the Eurozone's clearing centre. Others, meanwhile, are saying it's all the latest in the populist, anti-establishment wave that is politics in 2016.

Are they right?

The reforms - which, among other things, would have ended the Italian system of "perfect bicameralism" whereby the upper house has as much power as the lower, replacing the former with a legislature drawn from the regions in a similar manner to Germany's - were something of a dog's dinner, and although the referendum was forced on Renzi as they were unable to secure a two-thirds majority among legislators, it was a grave error to turn the vote into a referendum on his government. (Bear in mind that Italy is a multi-party democracy where the left's best ever performance netted it 49.8 per cent of the vote, so he was on a hiding to nothing with that approach.)

If there is a commonality in the votes for Brexit, Trump, Hofer, it's in the revenge of the countryside and the small towns against the cities, with the proviso that in Austria, that vote was large enough to hold back the tide). This was very different. Particularly striking: young graduates, so often the losers at the ballot box and pretty much everywhere else post-financial crash, voted against the reforms yesterday.

Nor can a vote that was supported by Silvio Berlusconi, two of the three major parties, as well as Mario Monti, the technocrat appointed effectively on the demands of Italy's creditors, and the Economist be accurately described as a revolt against "the establishment" if that term is to have any meaningful use whatsoever.  

Of course, it could yet lead to a Brexit-style shock. Renzi's Democratic Party could collapse into in-fighting if his departure is permanent - though who knows, he might parlay his graceful concession speech and the likely chaos that is to follow into a triumphant second act - and although his party has a narrow lead in most polls, the Five Star Movement could win a snap election if one occurs.

That raises the nightmare prospect for Brussels of a Eurosceptic in power in a founder-member of the European Union and the single European currency. (That said, it should be noted that Five Star are opponents of the Euro, not of the European Union. The word "Eurosceptic" is perhaps making some anti-Europeans here in the UK overexcited.)

But as Open Europe noted in their very good primer on the referendum before the result that is still very much worth reading, that not only requires Five Star to win an election, but to hold and win not just a referendum on Italy's Euro membership, but to first win a referendum on changing the constitution to allow such a referendum in the first place. (And remember that support for the EU is up in the EU27 following the Brexit vote, too.)

The biggest risk is financial, not political. Renzi had acquired a quasi-mythical status in the eyes of foreign investors, meaning that his departure will make global finance nervous and could result in the rescue deal for Monte Paschi, the world's oldest bank, being mothballed. Although a economic crisis on the scale of the one Italy experienced in 2011 is unlikely, it's not impossible either. And what follows that may justify the comparisons to Trump rather more than Renzi's defeat yesterday.

THE FUTURE'S ORANGE, BUT NOT BRIGHT

Donald Trump, President-Elect of the world's largest superpower, has taken to Twitter to lambast the Chinese government, the world's second-largest superpower, and also a nation which holds both large numbers of nuclear weapons and vast amounts of American debt. 

The cause of the row? Trump became the first President or President-Elect to talk directly to Taiwan's president since 1979, which the Chinese government has taken umbrage to. (China regards Taiwan as a renegade province, not a separate nation.) 

I'LL SEE EU IN COURT

The government's appeal against the High Court's judgement that Parliament, not the Prime Minister, has the ultimate authority to trigger Article 50 begins today. The argument hinges on whether or not triggering Article 50 represents a loss of rights - if, as the High Court accepted it did, then only the legislature can vote to remove rights, rather than have it done through the royal prerogative. Gina Miller, the lead claimant in the case, tells the Guardianthat Supreme Court judges are being unfairly vilified in the right-wing press, who she blames for the death threats against her. 

TANGLED UP IN BLUE

The government is split over whether to continue paying into the European Union after Brexit to secure a decent standard of access to the single market, Oliver Wright reports in the Times. Boris Johnson used his tour of the Sunday shows to signal his opposition to the idea, which has been publicly backed by Philip Hammond, the Chancellor, and David Davis, the Brexit Secretary. Liam Fox is said to oppose any continued payments into the EU. 

PRETTY HUGE DECEPTION

Ukip's new leader, Paul Nuttall, has denied that he claimed to have a PhD from Liverpool Hope University, blaming the claim on a LinkedIn page set up by parties unknown. Andrew Marr also confronted Nuttall with past comments of him calling for the privatization of the NHS in 2011.

ON THE CASEY

Louise Casey, the government's integration tsar, has a new report out in which she says that ethnic segregation in the UK is increasing, and criticizes the government for not doing enough to tackle the problem. The big items: the condition of women in ethnic minority communities, a lack of English language lessons, and recommended an oath of allegiance for all public servants. It's the latter that has the Mail all excited: "Swear oath to live in Britain" is their splash. Anushka Asthana has the full details in the Guardian.

SPECIALIST IN FAILURE (TO PAY TAXES?)

Commons PAC chair Meg Hillier has called for football coach Jose Mourinho to be investigated over reports that he has moved millions offshore to avoid paying tax. (If 1-1 draws are tax deductible, that would explain a great deal.) 

SOUNDS UNNERVINGLY LIKE HOME

Theresa May has told the Radio Times what her Christmas is like: Midnight Mass, sleep, a church service, then lunch (goose) and Doctor Who. She has opened up on the difficulties of growing up in a vicarage (among other things, not getting to open your presents for aaages). 

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

It's beginning to feel a bit like Christmas! And to help you on your way, here's Anna's top 10 recommendations for Christmassy soundtracks.

MUST READS

Chimamanda Ngozi Adichie on how to respond to Trump

Labour has a horrible dilemma on Brexit, I say

Michael Chessum on why aping Ukip on Brexit is the path to Labour defeat

Jason on how politics makes us human

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Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.