Ed Miliband cannot be radical and cautious at the same time

The Labour leader indulges contradictory positions in his entourage. He needs to choose a course and

The Labour leader indulges contradictory positions in his entourage. He needs to choose a course and stick with it.

A new year has deepened old splits. This week Ed Miliband's guru Lord Glasman politely excoriated the party for seemingly having "no strategy". If anyone thought it was a direct attack on Ed Miliband, they missed the point. It was a thinly veiled assault on Ed Balls and the shadow chancellor's associated vision for the state.

Glasman is not alone. Labour MP Jim Murphy reached out to join him and In the Black Labour argued that the lack of coherence on the deficit was undermining the party's credibility. Liam Byrne MP called for benefits to be overhauled. Although Ed Miliband has agreed to all these positions in theory, he has not led them in practice.

Whilst the parliamentary party is closer to Ed Balls, the country is closer to Maurice Glasman, at least in terms of spending. Ed Miliband is somewhere in the middle, and the result is an awkward triangulation that doesn't get through to the public.

In his latest interview for the Guardian, the Labour leader papered over the split. He came out relatively strongly in favour of fiscal conservatism, saying that finding a way to improve the country with less money was "the challenge" facing Labour. But he also defended Ed Balls, saying that he was the man who led spending cuts in 1997.

This feels disingenuous. Ed Balls clearly believes a form of Keynesian economics is a credible way to get us out of the red, and if he does have plans to improve the country beyond a traditional tax and spend model, I haven't heard them. I am still not clear what his plans are to boost the private sector or how to rebalance growth out of the South East and financial services, although this may be because Balls believes it would take even more investment in enterprise zones or tax breaks, meaning even great cuts elsewhere.

Blue Labour is calling for a radically different programme. Glasman has repeatedly urged us to learn the lessons of Germany, increasing vocational education, regional banks and workers' representation. He wants a more reciprocal model of the state with a heavier emphasis on contribution, giving people control over assets rather than material flows. He wants a deep cultural change that allows the party to speak about small 'c' conservative values that deal with family, neighbourliness and place.

Glasman also clashes with Balls on the market. He wants to place limits on the flexibility of capital and labour and have a dialogue about responsible capitalism. Ed Balls seems at best uninterested with this approach. When the opposition asked Balls to define "predatory behaviour" heralded by his leader under the inspiration of Glasman, he had nothing to say, and as left blogger Sunny Hundal points out, Balls' recent position on bankers was essentially the same as the Conservatives.

Both sides have their challenges. The problem for Ed Balls is that his strategy seems bankrupt. We don't know where the money for tax and spend is going to come from. Even if we did, it doesn't answer the fact that Labour's huge welfare bill failed to empower many vulnerable people. And it's not where the public are at. They hate waste and want fiscal discipline.

The problem for Glasman is that he lacks a strategy for power. Ed Miliband is - or was - his key relationship with power. He took a risk by speaking out, and the leader's office is now irritated with him, and the parliamentary party is unlikely to be sympathetic. There are only so many times you can set fire to a bridge before it burns down completely.

So now Ed Miliband has to make a choice. I want him to succeed, but too often his interviews appear to be carving out a difficult intellectual position for journalists and politicians to accept as consistent. He needs to speak over the heads of Westminster elites and talk to the country about exactly what a Labour government would look like. His messages on the squeezed middle, responsibility and the promise of Britain are right on. He just needs the strength to follow through what these radical changes mean in practice. We need to see how Labour will turn a sense of national decline into something great.

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR