The answer to Labour's woes? Tax cuts

Balls and Miliband should call for the basic rate of income tax to be slashed.

The bleak economic news of recent weeks seems to have created far more uncertainty within Labour ranks than on the government benches. For a start, this is because it has slowly dawned on the party that if it wins in 2015 it will become a government of austerity too. Hence all the talk of fiscal responsibility, from Ed Balls and Ed Miliband, as well as their 'critical friends' within the party.

The two Eds know, however, that political strategy must not be allowed to dictate economics. It would be disastrous if Labour were to decide that the only path to restoring its economic reputation is by hugging close to George Osborne's spending plans and fiscal rules. If the party follows that course it would be betraying a generation of British businesses and families.

For it's time to accept that the UK is in depression. Families with middle incomes will be poorer in 2015 than 2002, the country face at least seven years of austerity in the public finances, and it will take longer for GDP to return to pre-crash levels than in the 1930s. George Osborne's painful medicine was designed for a V-shaped recession not an L-shaped 'lost decade'.

The left should now feel duty-bound to argue that only a massive fiscal stimulus is proportionate to the scale of the crisis. For without government intervention a decade of low growth and soaring unemployment is inevitable. It is fine for Labour to promise a clear path to balanced budgets over the next decade, but only alongside a major fiscal intervention now.

To bring the politics into line with the economics, however, Labour needs a game-changer. For when the left argues for short-term Keynesian stimulus, neither the public nor the bond markets are convinced: they sense it is a ruse to defend every cherished corner of the welfare state, a strategy of permanent deficit not temporary stimulus. So to stimulate the economy now Labour should argue not for spending, but for tax cuts. If Labour sets out a plan to pump money into the economy through tax cuts, the party would undermine the charge of statism and no doubt cause some embarrassment for the tax-cutting right as well.

By contrast, there's little to gain from delaying spending cuts. The harder the party resists cuts today, the more will be left for it to do if it retakes power in 2015. So Labour's only spending commitments should be aimed at leveraging private investment or creating jobs for the unemployed; and even these must be fully-funded from new taxes on the wealthy to leave the long-term path of deficit reduction unchanged.

These should not be any tax cuts, however. They must be time-limited and only benefit the bottom 90 per cent of families. First, to ensure the package is progressive, Labour could propose a time-limited 'VAT cash-back' scheme, for low income households, to get the tills ringing. For a time-limited period the government would issue credits to offset VAT liability, paid to benefit and tax credit recipients who are the hardest hit and most likely to spend.

But to really defy political convention, Labour should go further and campaign for the most visible and symbolic tax cut possible. For two years only and with suitable claw-backs from higher-rate taxpayers, Balls and Miliband should call for the basic rate of income tax to be slashed. Only then would people sit up and take notice, perhaps reappraising Labour for the first time in years, and forcing the Tories onto the wrong side of the argument.

Some people on the left will recoil at the thought of tax cuts as the welfare state is threatened, and it's true that none of the options are pretty. But if the left really wants to argue for economic stimulus as a counter to the self-defeating vortex of austerity, it must side-step the statist trap that has been set for us.

Time-limited tax cuts are the middle way between economic despair and the charge of deficit denial.

Andrew Harrop is the general secretary of the Fabian Society

Andrew Harrop is general secretary of the Fabian Society.

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Bomb Isil? That's exactly what they want

The government appears not to answer the nature of its enemy, warns Maria Norris.

As MPs are set to vote on further airstrikes in Syria, it is difficult to shake off the feeling that the government does not fully appreciate the complexity of the problem Isil poses. Just a cursory glance at its magazine, the pronouncements of its leaders and its ideology reveals that Isil is desperate for Western bombs to fall out of the sky. As Martin Chulov argues, Isil is fighting a war it believes was preordained since the early days of Islam. Isil’s obsession with the city of Dabiq, in Northern Syria, stems from a hadith which prophesises that the ‘Crusader’ army will land in the city as a precursor to a final battle where Islam will emerge victorious. Dabiq is also the name of its magazine, which starts every issue with the same quote: "The spark has been lit here in Iraq, and its heat will continue to intensify -- by Allah's permission -- until it burns the crusader armies in Dabiq". Isil wants a war with the West. If we don’t negotiate with terrorists, then we also should not give them what they want.

Further, bombs are indiscriminate and will inevitably lead to the suffering of those trapped in Isil territories. Isil is counting on this suffering to swell their ranks. Civilian suffering from airstrikes only underline the narrative that the West is at war with Islam, which plays directly into Isil’s hands. And despite misleading headlines and the genuine government concern with individuals fleeing to Syria, Isis is supremely unpopular. It is no wonder that its magazine is filled with glossy adds begging people to move to its territories.  You cannot be a state without people. Terrorist attacks such as Paris thus have a two-pronged purpose: they provoke the West to respond with its military, and they act as a recruitment drive. The fact that fake Syrian passports were found around the sites of the Paris attacks is no coincidence as Isil are both seeking to stem the flow of refugees from its territories and hoping to provoke an Islamophobic backlash. They hope that, as more Muslims feel alienated in the West, more will join them, not just as fighters, but as the doctors, nurses and teachers it desperately needs.

In addition to this, airstrikes overlook the fact that Isil is a result of what Fawaz Gerges calls a severe, organic institutional crisis in the Middle East. In a lecture at the London School of Economics earlier this year, Gerges pointed out the dysfunction created when a region that is incredibly resource rich also is also deeply undemocratic, riddled with corruption, food insecurity, unemployment and poverty. This forms an institutional vacuum that is filled by non-state actors as the population does not trust its political structures. Further, the civil war in Syria is also the site of the toxic soup of Middle Eastern state dysfunction. Iran supports Assad, Saudi Arabia and the Gulf countries, fund anti-Shia groups in Syria. Throw in the Kurdish conflict, Turkey’s ambiguous position and Russian bombs, it is difficult to see how airstrikes will solve anything.

Finally, it is crucial that Isil is seen as a direct result of the Iraq war. The American-led invasion destroyed the institutions, giving the Shia majority power almost overnight, creating deep dissatisfaction in the Sunni regions of Iraq. On top of this thousands of foreign fighters flooded Iraq to fight the invaders, attracting disenfranchised and angry Sunnis. The result is that since 2003, Iraq has been embroiled in a sectarian civil war.  It is in civil war, inherently connected to the Iraq War, that you find the roots of Isil. As even the Prime Minister concedes that ground troops are necessary, albeit it regional ground troops with its own set of problems, it is important to consider what further monster can arise from the ashes of another ill-thought out military intervention in the Middle East.
We have had decades of military intervention in the Middle East with disastrous consequences. Airstrikes represent business as usual, when what we actually need is a radically new approach. Who is funding Isil? Who is buying its oil? How to curb Isil’s recruitment drives? What can be done about the refugees? How to end the conflict in Syria? What happens to Assad? These are questions hopefully being addressed in talks recently held in Vienna with Russian, Ira, the USA, France, Syria’s neighbours and the Gulf states. Airstrikes do not answer any of these questions. What airstrikes do is give Isil exactly what it is asking for. Surely this is reason enough not to bomb Syria. 

Maria W. Norris is a PhD candidate and a teacher at the London School of Economics and Political Science. Her PhD is on the UK counter-terrorism strategy since 9/11 and its relationship with identity. She tweets as @MariaWNorris.