Osborne ducks the growth challenge

The £2.5bn increase in capital spending, funded by greater cuts elsewhere, will boost GDP by just 0.06 per cent.

Tomorrow's Budget is George Osborne's last opportunity to make a significant difference to growth before the election but we now know it's one he's not going to take. The Chancellor will announce an increase of £2.5bn in capital spending but rather than borrowing for growth, as Vince Cable, the Economist and Bloomberg have all recently urged him to, the move will be funded through greater cuts elsewhere.

Osborne told the cabinet this morning that all unprotected departments would have their budgets reduced by a further 1 per cent in 2013/14 and 2014/15. As a result, the effectiveness of the £2.5bn fund (itself a paltry amount) will be significantly reduced. Based on the OBR's fiscal multipliers (those pesky things that Robert Chote recently reminded the Prime Minister of), the increase in capital spending will boost GDP by £2.5bn but the cut in current spending will reduce it by £1.5bn. The net result, according to TUC economist Duncan Weldon, is that output will be increased by just 0.06 per cent of GDP (£1bn). A plan for growth this is not. 

Though Osborne will claim otherwise, alternatives were on offer. Cable called for the Chancellor to take advantage of Britain's historically low bond yields and borrow £14bn (1 per cent of GDP) to invest in housebuilding. As he wrote in his New Statesman essay:

One obvious question is why capital investment cannot now be greatly expanded. Pessimists say that the central government is incapable of mobilising capital investment quickly. But that is absurd: only five years ago the government was managing to build infrastructure, schools and hospitals at a level £20bn higher than last year. Businesses are forward-thinking and react to a future pipe - line of activity, regardless of how “shovel ready” it may be: we have seen that in energy investment, where the major firms need certainty over decades.

The Economist recommended an additional £28bn of infrastructure investment, with at least half funded through higher borrowing. Bloomberg argued for a minimum stimulus of $21bn, again largely deficit-financed. But Osborne persisting in the delusion that "you can't borrow more to borrow less" (in fact, as any Keynesian knows, you can) has once again chosen austerity over growth. 

Chancellor of the Exchequer George Osborne leaves number 11 Downing Street in central London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.