McCluskey ignores the deficit that Osborne will leave

Nowhere does the Unite general secretary acknowledge the £79bn deficit that Labour would inherit.

"Union chief attacks Labour leader" is rarely a headline worthy of much attention but then Len McCluskey is not any trade union leader. As general secretary of Unite he leads the country's biggest trade union and Labour's biggest donor, responsible for a quarter of all donations to the party. And, lest we forget, had it not been for McCluskey's union, among others, David Miliband, not Ed, would now be wearing the crown.

But the younger Miliband has little to thank McCluskey for this morning. His article in today's Guardian is a full-frontal attack on the Labour leader and Ed Balls for their "embrace of austerity" and the government's public sector pay squeeze. Anti-cuts protesters, he writes, have been left "disenfranchised" by a Blairite "policy coup" that threatens Miliband's leadership.

To which Balls and Miliband should reply, we have changed our mind because the facts have changed. The failure of George Osborne's plan means that, based on Office for Budget Responsibility forecasts, the next government will inherit a deficit of £79bn. As growth continues to fall below target, this figure will continue to soar upwards. Yet nowhere in his piece does McCluskey acknowledge this new fiscal reality. Ball's statement that the "starting point" for Labour (note the wriggle room) is "we're going to have to keep all these cuts" is simply an acknowledgement that the country has a lot less money than it thought. Labour cannot credibly pledge not only to avoid further cuts if elected in 2015 (Osborne would stretch his into 2017) but to reverse those that have already been made.

Contrary to what McCluskey writes, the shadow chancellor has not embraced "deficit reduction through spending cuts". He continues to oppose both the speed and the scale of the coalition's cuts, warning that they mean a reduced level of growth, higher unemployment and, consequently, a higher deficit. Osborne is now set to borrow more than Alistair Darling would have. But we cannot rerun the 2010 general election. The Chancellor plainly has no intention of changing course and the country will suffer for it. Balls's intervention was, to coin a phrase, an attempt to look forward, not back. Whether this will benefit Labour politically is an open question. At a time when some forecasters say the country is already in recession, the party's shift of emphasis risks appearing irrelevant at best and eccentric at worst. Labour's new position (cuts are harming the economy, so we won't be able to reverse them) cannot easily be sold on the doorstep. Moreover, McCluskey is right to assail Balls for buying "into the hoary old fallacy that increasing the wages of the low-paid risks unemployment." Keynes's rottweiler has endorsed a pay policy that will further squeeze demand out of the economy.

Balls's wager is that while Labour may lose short-term popularity it will win long-term credibility. His model appears to be the 1997 spending freeze (devised by the man himself) that reassured nagging doubts about "spendthrift" Labour. We will never know how the party would have fared had it simply played the "too far, too fast" tune. McCluskey's fears, then, are not ungrounded. But until he shows some awareness of the dramatically altered economic reality, he will not be an honest participant in this debate.

George Eaton is political editor of the New Statesman.

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Forget gaining £350m a week, Brexit would cost the UK £300m a week

Figures from the government's own Office for Budget Responsibility reveal the negative economic impact Brexit would have. 

Even now, there are some who persist in claiming that Boris Johnson's use of the £350m a week figure was accurate. The UK's gross, as opposed to net EU contribution, is precisely this large, they say. Yet this ignores that Britain's annual rebate (which reduced its overall 2016 contribution to £252m a week) is not "returned" by Brussels but, rather, never leaves Britain to begin with. 

Then there is the £4.1bn that the government received from the EU in public funding, and the £1.5bn allocated directly to British organisations. Fine, the Leavers say, the latter could be better managed by the UK after Brexit (with more for the NHS and less for agriculture).

But this entire discussion ignores that EU withdrawal is set to leave the UK with less, rather than more, to spend. As Carl Emmerson, the deputy director of the Institute for Fiscal Studies, notes in a letter in today's Times: "The bigger picture is that the forecast health of the public finances was downgraded by £15bn per year - or almost £300m per week - as a direct result of the Brexit vote. Not only will we not regain control of £350m weekly as a result of Brexit, we are likely to make a net fiscal loss from it. Those are the numbers and forecasts which the government has adopted. It is perhaps surprising that members of the government are suggesting rather different figures."

The Office for Budget Responsibility forecasts, to which Emmerson refers, are shown below (the £15bn figure appearing in the 2020/21 column).

Some on the right contend that a blitz of tax cuts and deregulation following Brexit would unleash  higher growth. But aside from the deleterious economic and social consequences that could result, there is, as I noted yesterday, no majority in parliament or in the country for this course. 

George Eaton is political editor of the New Statesman.