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Labour must go for growth

Alistair Darling must use the pre-Budget report to explain why the Tories would take us deeper into

David Cameron believes the biggest economic challenge facing the country is government debt. He's wrong. The real challenge is delivering strong and sustainable growth.

This year the government deficit will amount to roughly 12.5 per cent of GDP. But this is the right approach in a recession. Government spending is compensating for a lack of private spending - as households repay debt and businesses either can't or won't invest (because banks won't lend). But the debt ratio is not unique and, indeed, is in line with the other G8 economies. Yes, we need to bring the debt and deficit down - but it is not the immediate or biggest challenge we face, and to reduce the deficit now would prolong the recession and pain to businesses and families.

The surest way out of the debt problem is economic growth - growth will boost tax revenues, reduce unemployment and hence government spending. A strategy for growth should be the focus of Alistair Darling's pre-Budget report (PBR).

Foremost in this strategy must be investment in the jobs and industries of the future. The UK has the potential to generate 400,000 jobs in green industries in the next few years. But there is no guarantee that hi-tech, high-skilled jobs will come to the UK. It is hard in the current economic environment for businesses and entrepreneurs with innovative and exciting ideas to secure funding for long-term investment. A national infrastructure, or investment bank, would enable government and business to act in partnership to build the future jobs the economy needs.

Second, to get growth back on track we must ensure that businesses and families can access bank finance at affordable rates. And, as we rebuild the economy, we must restructure the financial sector so that it cannot bring the economy to its knees again but instead fulfil the role it should provide - to channel savings to sensible investment.

The PBR should address these challenges directly, with legally enforceable lending targets for banks - focusing on money out of the bank door, not offers of loans at rates so extortionate that businesses can't afford to take them up. The lack of bank lending reflects a desire on the part of banks to rebuild their balance sheets, but without a strong business sector the banks will certainly incur further losses. Better instead for banks to improve their balance sheets through reduced bonus payouts. So, the PBR should also include a windfall tax on the excessive profits of banks or a 60 per cent rate of tax on bonuses of over £10,000. This would discourage payouts which are eroding bank capital, improve the public finances - which in large part have deteriorated because of support to the bailed-out banks - and begin to tackle the reckless bonus culture that got us in to this predicament.

Looking forward, there must be no return to "business as usual" in the banking sector - the "socially useless" functions of banks must be addressed. The PBR should include a review of the size and ownership model of our banks, including proposals to support the growth of building societies, and a commitment to look seriously at the remutualisation of Northern Rock.

But while it is essential that government does not withdraw the stimulus yet, it would be irresponsible not to commit to reducing the deficit as the economy recovers. Sound public finances are important for economic growth. Labour knows this, which it is why, between 1997 and 2006, the debt burden was cut from 42.5 to 36 per cent of GDP, reducing debt interest payments and freeing up money for investment in public services. Large budget deficits are needed during the recession to pump-prime the economy, but not when growth is back on track.

Through a combination of strong growth, tax increases and spending cuts, halving the budget deficit in four years is achievable but a credible plan for doing so is needed. At the moment, the right is winning the argument on how to achieve this, emphasising the burden that public spending will bear. Yet research by the think tank Compass shows that 78 per cent of people think the richest 10 per cent should pay at least the same percentage of their incomes in tax as the poorest. Moreover, the support for the new 50 per cent tax rate, and the growing discomfort around Tory proposals to reduce taxes for 3,000 millionaires by £200,000, shows that the country is more progressive than government gives them credit for. Deficit reduction must be shared between tax increases and spending cuts; and, again, growth will reduce the burden of the debt.

Contrast this growth approach with the rhetoric of George Osborne, the shadow chancellor. Osborne wants to cut spending right now, against all the historical evidence and against the international consensus. As Dominique Strauss-Kahn, managing director of the International Monetary Fund, said on 23 November: "We recommend erring on the side of caution, as exiting [from stimulus plans] too early is costlier than exiting too late."

But Osborne is not listening to the evidence. His approach threatens the recovery by taking money out of the economy at precisely the time it is doing most good. The risks of a double-dip recession have not gone away, and would be higher if government withdraws - you need only look at Japan in the 1990s or the US in the 1930s to see that.

In reality, Cameron and Osborne's desire for cuts are motivated by an ideological zeal to reduce the size of the state, rather than an economically literate strategy to build a strong economy.

The PBR is an opportunity for Darling to put down a challenge to Osborne. Will the Tories invest in the jobs and technologies of the future? Will they have the courage to take on those in the City who still argue for light-touch regulation? Or will they stick with their siren call - "cut spending now"? The economy remains in recession and the global recovery is fragile. With an election fast approaching, Darling must set out Labour's strategy for growth and deficit reduction with an ambitious pre-Budget report.

Rachel Reeves is the Labour parliamentary candidate for Leeds West

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.

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What Jeremy Corbyn can learn from Orwell

Corbyn’s ideas may echo George Orwell’s – but they’d need Orwell’s Britain to work. It’s time Corbyn accepted the British as they are today.

All Labour Party leaderships since 1900 have offered themselves as “new”, but Tony Blair’s succession in 1994 triggered a break with the past so ruthless that the Labour leadership virtually declared war on the party. Now it is party members’ turn and they, for now at any rate, think that real Labour is Jeremy.

To Keir Hardie, real Labour had been a trade union lobby expounding Fellowship. To the Webbs, real Labour was “common ownership” by the best means available. Sidney’s Clause Four (adopted 1918) left open what that might be. In the 1920s, the Christian Socialist R H Tawney stitched Equality into the banner, but during the Depression young intellectuals such as Evan Durbin and Hugh Gaitskell designated Planning as Labour’s modern mission. After the Second World War, Clement Attlee followed the miners (and the London Passenger Transport Board) into Nationalisation. Harold Wilson tried to inject Science and Technology into the mix but everything after that was an attempt to move Labour away from state-regulated markets and in the direction of market-regulated states.

What made the recent leadership contest so alarming was how broken was the intellectual tradition. None of the candidates made anything of a long history of thinking about the relationship between socialism and what the people want. Yvette Cooper wanted to go over the numbers; only they were the wrong numbers. Andy Burnham twisted and turned. Liz Kendall based her bid on two words: “Have me.” Only Jeremy Corbyn seemed to have any kind of Labour narrative to tell and, of course, ever the ­rebel, he was not responsible for any of it. His conference address in Brighton was little more than the notes of a street-corner campaigner to a small crowd.

Given the paucity of thinking, and this being an English party for now, it is only a matter of time before George Orwell is brought in to see how Jeremy measures up. In fact, it’s happened already. Rafael Behr in the Guardian and Nick Cohen in the Spectator both see him as the kind of hard-left intellectual Orwell dreaded, while Charles Cooke in the National Review and Jason Cowley in the New Statesman joined unlikely fashion forces to take a side-look at Jeremy’s dreadful dress sense – to Orwell, a sure sign of a socialist. Cooke thought he looked like a “burned-out geography teacher at a third-rate comprehensive”. Cowley thought he looked like a red-brick university sociology lecturer circa 1978. Fair enough. He does. But there is more. Being a middle-class teetotal vegetarian bicycling socialistic feministic atheistic metropolitan anti-racist republican nice guy, with allotment and “squashily pacifist” leanings to match, clearly puts him in the land of the cranks as described by Orwell in The Road to Wigan Pier (1937) – one of “that dreary tribe of high-minded women and sandal-wearers and bearded fruit-juice drinkers who come flocking towards the smell of ‘progress’ like bluebottles to a dead cat”. And though Corbyn, as “a fully fledged, fully bearded, unabashed socialist” (Huffington Post), might make all true Orwellians twitch, he really made their day when he refused to sing the National Anthem. Orwell cited precisely that (see “The Lion and the Unicorn”, 1941) as an example of the distance between left-wing intellectuals and the people. It seemed that, by standing there, mouth shut, Comrade Corbyn didn’t just cut his wrists, he lay down full length in the coffin and pulled the lid shut.


Trouble is, this line of attack not only misrepresents the Labour leader, it misrepresents Orwell. For the great man was not as unflinchingly straight and true as some people think. It is impossible, for instance, to think of Orwell singing “God Save the King”, because he, too, was one of that “dreary tribe” of London lefties, and even when he joined Labour he remained ever the rebel. As for Corbyn, for a start, he is not badly dressed. He just doesn’t look like Chuka or Tristram. He may look like a threadbare schoolteacher, but Orwell was one twice over. Orwell was never a vegetarian or a teetotaller, but, like Corbyn, neither was he interested in fancy food (or drink), he kept an allotment, drove a motorbike, bicycled, cared about the poor, cared about the environment, loathed the empire, came close to pacifism at one point, and opposed war with Germany well past the time when it was reasonable to do so.

In Orwell’s thinking about socialism, for too long his main reference point was the London Marxist left. Not only did he make speeches in favour of revolutions, he took part in one with a gun in his hand. Orwell was far more interested, as Corbyn has been far more interested, in speaking truth to power than in holding office. His loyalty was to the movement, or at least the idea of the movement, not to MPs or the front bench, which he rarely mentioned. There is nothing in Corbyn’s position that would have shocked Orwell and, should they have met, there’d have been much to talk about: belief in public ownership and non-economic values, confidence in the state’s ability to make life better, progressive taxation, national health, state education, social care, anti-socially useless banking, anti-colonialism and a whole lot of other anti-isms besides. It’s hard to be sure what Orwell’s position would have been on Trident and immigration. Not Corbyn’s, I suspect. He was not as alert to feminism as he might have been but equally, few men try to write novels from a woman’s point of view and all Orwellians recognise that Julia is the dark hero of Nineteen Eighty-Four. In truth they are both austere types, not in it for themselves and not on anyone else’s expense account either. Corbyn won the leadership because this shone through from the very beginning. He came across as unaffected and straightforward – much as Orwell tried to be in his writing.

Except, as powerfully expressed in these pages by John Gray, Corbyn’s politics were made for another world. What sort of world would he need? First off, he’d need a regulated labour market: regulated by the state in partnership with a labour movement sensitive to what people wanted and experienced in trying to provide it. He would also need capital controls, a manufacturing base capable of building the new investment with Keynesian payback, an efficient and motivated Inland Revenue, a widespread public-service ethos that sees the country as an asset, not a market, and an overwhelming democratic mandate to get things done. In other words, Corbyn needs Orwell’s Britain – not this one – and at the very least, if he can’t have that, he needs the freedom to act that the European Commission forbids.

There’s another problem. Orwell did not trust left-wing intellectuals and spent half his life trying to work out their motivations as a class who spoke for the people, went in search of the people, and praised the people, but did not know them or believe in them. True, Corbyn says he wants to be open and inclusive, but we know he can’t possibly mean it when he says it will be the party, not him or the PLP, that will decide policy, just as we knew it couldn’t possibly be true when he said he’d turn PMQs into the People’s Question Time. Jeremy hasn’t changed his mind in forty years, appears to have great difficulty (unlike Tony Benn) in fusing socialism to national identity or experience (Hardie, Ben Okri and Maya Angelou were bolted on to his Brighton speech) and seems to think that not being happy with what you are given somehow captures the historic essence of socialism (rather than its opposite).

Granted, not thinking outside the ­circle is an inherent fault of the sectarian left but some of our most prominent left-wing journalists have it, too. Working-class support for nationalisation? Good. Right answer! Working-class opposition to benefit scroungers and further mass immigration? Bad. Wrong answer! Would you like to try again? In his essay “In Defence of Comrade Zilliacus” (1947) Orwell reckoned that left-wing intellectuals saw only what they wanted to see. For all their talk of representing the people, they hated the masses. “What they are frightened of is the prevailing opinion within their own group . . . there is always an orthodoxy, a parrot-cry . . .”

The game is hard and he may go down in a welter of knives, yet Corbyn still has time. He may go on making the same speech – on the benefits of apple pie to apple growers – but at some point he will have to drop the wish-list and get on the side of the British people as they are, and live with that, and build into it. Only the nation state can even begin to do the things he wants to do. The quicker he gets that, the quicker we can see if the latest incarnation of new Labour has a future.

Robert Colls is the author of “George Orwell: English Rebel” (Oxford University Press)

This article first appeared in the 08 October 2015 issue of the New Statesman, Putin vs Isis