Labour must recognise the need for ruthless prioritisation

The party must seize control of the debate and show a bit of leg when it comes to economic policy.


There are three central arguments that will determine the outcome of the next election. One is over fairness, a second is over economic management, and a third over cultural affinity with the British – or more accurately the English – people.

Labour is winning the first of these hands down, but on the other two there is still a lot of spade work to do. Winning the cultural argument is perhaps the hardest. But it is on the economy that more progress must be made now if Labour is to make a genuine breakthrough.

Many observers wrongly believe that a weak economy and depressed living standards will hand Labour victory. There is nothing axiomatic about this. In fact, even if there is no economic recovery – and there may well be – this assumption is intoxicatingly complacent. No one should confuse the vicissitudes of government with the big questions that determine election outcomes.

If economic malaise continues, it is likely that in the general election campaign more questions will be asked of Labour than of the Conservatives because fear of change will dominate the psychology of the electorate. Credit downgrade, double, triple or even quadruple dip, it will not matter much. Elections are about choice.

And on the economy one question above all will define the debates – where is the money coming from? There is nothing new in this. It is an age old question, which has defined many elections. But this time, without better economic news, anxiety about debt – national and personal - will make it more potent.

To borrow from George Bernard Shaw, if Labour is unable to answer this question - we will neither find it easy to look at things as they are and ask why nor dream of things that never were and ask why not?

Ed Miliband knows this. Hence, his use of the phrase “ruthless prioritisation” in his Fabian lecture in January. It is time his party knew it.

There is a perfectly credible economic argument that the pace of cuts should be slower but whether you are a Keynesian, a Monetarist or just care about the price of a loaf of bread, it cannot be denied that there is now a need for some ruthless prioritisation.

Economics and politics sometimes pass in the night, but they rarely face in the same direction. The paradox is that the more you side with the view that cuts should be slower, the more you must reassure the electorate by demonstrating your determination to prioritise ruthlessly.

Taxing the rich more is not ruthless prioritisation, but the easy option; a habit that progressive parties should indulge in judiciously. Tax avoidance has to be tackled, but it is fiendishly difficult to raise more revenue consistently by doing so, particularly from global corporations. To deal with it effectively often requires international agreement.

Before Labour comes to a judgement on the spending envelope it needs to set out a coherent case to begin to answer the question that looms large on the horizon.

First, it must define, or rather redefine, the role of the state, and from this demonstrate how it will deliver value for money.

Old Labour believed that central government’s job was to deliver. New Labour wanted to steer not row the boat, but this too often became micro management from the centre, which stifled local initiative. One Nation Labour must let go. On housing benefit, employment programmes, and support for business, there are strong arguments for devolving certain powers to local government.

The IPPR has already made the case for some devolution of powers, but it has also articulated an excellent case for what it terms the ‘relational state.’ Fundamentally, opportunity derives from connections: who you know, not just what you know. By beginning to think about the problem in this way One Nation Labour can radically redefine the role of the state.

Here there are encouraging signs. In his recent contribution to the debate, Jon Cruddas, set out the case for both these changes in thinking.  But to make it fly Labour’s Treasury team must also sign up to this agenda.

One of Ed Miliband’s most effective themes is responsibility, from top to bottom. He should tie government into this theme, based on the responsibility of government to deliver good value for taxpayers. To make the case for this there are many reforms that should be advocated. Most of which don’t normally grab headlines, but demonstrate a real desire to be responsible with taxpayer’s money. An obvious example is the amalgamation of local government pensions, which has the potential to save billions.

Labour is beginning to think about ways to raise revenue which do not entail plucking the goose. It has to be careful not to show too much leg too soon but one idea that has far more mileage is social impact bonds, which reward investors only if certain agreed social outcomes are attained.

But even if Labour articulates these arguments well it cannot duck the need for ruthless prioritisation.  Universal provision of certain services and core universal benefits are vital to binding the nation together, but the boundaries of state provision have always fluctuated, and a debate about those boundaries, based on clear principles, should hold no fear. Certainly not for a mature party that is hungry for government.

For those who would protect everything and change nothing ask yourself how you would react if the Tories were to declare - as they are likely to do - that in the next parliament they would scrap certain pensioner benefits, such as free bus passes and the winter fuel allowance, and put the money instead into a better minimum pension, to protect the poorest?

It is far better for Labour to demonstrate strength and open up this debate now than to respond meekly when the question is put. Oppositions oppose, governments in waiting confront the challenges the nation faces.

Nick Pecorelli is associate director of The Campaign Company

Ed Miliband. Photograph: Getty Images

Nick Pecorelli is Associate Director of The Campaign Company

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.