The left must beware of excessive pessimism

The search for economic realism and credibility can easily tip into fatalism.

The task for a Labour government elected in 2015 will be a tough one. The debt and deficit will still be high and so one, old, conception of social democracy, of spending more money, will not be available and new approaches will be needed.  My former Downing Street colleagues Nick Pearce and Gavin Kelly gave a typically thorough and sensible version of that in a recent article. But there are a number of reasons why we must not take that too far.

First, Labour has to win the next election. And that means finding a strategy that has realism running through it but that also has the uplifting sense of optimism.  Yes, economic credibility is crucial but telling people that if they vote for us, things will be a bit less bad than under the other lot, will never do for social democrats. Even when we are forced to be modest in our offer in the short-term, we must hold up a better Britain for the future. If the only choice is cuts, some people will shrug and say "better the devil we know".

The big danger is not of Labour being punished for being unclear on its priorities for spending cuts, but that it may still be held responsible for having presided over economic collapse. Being macho on cuts is not an answer to that.  The clamour from commentators arguing that Labour must be exact on what it would cut is an issue to be managed, not to build a strategy around.

We do not even know what the economic situation will be.  A possible scenario is that, by 2015, we are starting to have a little growth but how quickly the deficit and debt will come down when and if UK and EU growth kicks in is very hard to say. Economists are hopeless at forecasting this sort of thing but historically tend to severely underestimate how quickly deficits rise in a recession and how fast they fall in an upturn.

The search for realism and credibility can easily tip into fatalism. Over time the deficit needs to come down but we have some time to play with. Markets are not itching to punish the UK for not cutting hard enough – as even the IMF now agrees - especially if the spending we are making is clearly investment spend with good supply side and "preventative" features (that reduces spend in the future).

Another area where fatalism can take hold is on the ageing society. Of course there will be strains, but analysis of the OBR long term fiscal sustainability forecasts makes clear that things are not that grim, that much of the problem is about health productivity as much as the age profile of the population.

Growth and how we get it going is the number one thing to talk about. We must avoid transforming from being social democrats who too often only wanted to talk about spend and not how to create wealth, into social democrats who only talk about how to cut.  Going forward, the route to growth must be about investment, competition policy, industrial and labour market policy.

In many ways the awkwardly titled ‘pre-distribution’ debate should get us talking about growth and the structure of our economy.  It is clearly right to say that life would be much easier for social democrats if household incomes from market wages were more equal and so traditional redistribution did not have to do so much work. However, a number of the options put forward are not only rather small but are in fact about redistribution and not about changing the structure of industry.

Putting aside issues of employment, a more universal living wage would be useful (especially for the public sector and contracted out services) and getting more mums back to work to balance up household incomes in the lower deciles is an important policy goal. But policies like that  do not really address the major problem of Britain having far too many people employed in firms and sectors that have a low wage, low skills  approach to their activity. The task now is to take advantage of the mood in the country today to search for bolder approaches and not be so critical of redistribution itself that we forget that we will always need it as an important tool in our armoury.

None of this means that tough decisions can or should be avoided on tax and spending. I would be surprised if Labour did not have to embrace more or less whatever the government has said on spending plans for at least the first year or two of a new Parliament, much as it did in 1997. This makes political sense but is also practical since it is very hard to understand where the manoeuvre room is until you are in power. 

We, as social democrats, need to widen the conversation way beyond spending (and tax) to a whole set of other issues that deliver for Britain.

One is to do with getting regulation right so that banks, utilities and other companies act in ways that are more favourable to the national good and to equity. Corporate governance and competition reform come into this category, changing the way that people experience markets and promoting social responsibility.

There are issues at local level and the reclaiming civil society.  Public spending will play a smaller role in the next period than it has in the last decade or two. Yet unlike the right, that sees this as a chance to contract out to for-profit providers, the centre-left can draw on its history of self-help, mutualism and voluntary action to make sure communities are cohesive, support each other and do so in fair ways that avoid total post-code lotteries.

These are some ways of both delivering growth and getting pre-distribution better that get us towards values and keep us away from spend (or tax). These sort of ideas need to have as much prominence in any debates on growth and fairness, as supposing that the answer to our industrial and economic issues will revolve around  more childcare, valuable as that would be.

I am not a tax and spend social democrat: far from it. But I have seen debates of doom and gloom take over the centre–left before.  This gloomy introspection is a dead-end.  Instead we have to focus on growth and the re-creation of hope. Realism yes, but let’s keep our nerve, optimism and our political sense too.

Dan Corry worked for the Labour Party 1989-92, was a Special Adviser in various departments during most of the Labour Government years, including Chair of the Council of Economic Advisers in the Treasury 2006-7 and Senior Economic Adviser to the PM 2007-2010.

Ed Miliband addresses TUC members in Hyde Park at the end of a march in protest against the government's austerity measures. Photograph: Getty Images.
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Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.