Miliband admits Labour would borrow more - now he needs to make the argument

The Labour leader should explain why borrowing for growth is the economically responsible course.

After his disastrous appearance on The World At One yesterday, it was a more relaxed Ed Miliband who took to the Daybreak sofa this morning. Asked about the ill-fated interview by presenter Lorraine Kelly and his refusal to say whether Labour would borrow more in the short term, he replied: 

Look, that happens. You do interviews; some interviews well, some interviews not so well. Look, I was asked a question about VAT and Labour's plans to cut VAT. I am clear about this, a temporary cut in VAT, as we are proposing, would lead to a temporary rise in borrowing. The point I was making yesterday was that if you can get growth going by cutting VAT, then over time you will see actually borrowing fall - that was the point I was making yesterday and it's good to be able to make it today. 

Although Miliband made it sound otherwise, the admission was a significant one. Labour's "five point-plan for jobs and growth" has always rested on the assumption that the party would borrow more in the short-term. Were it do otherwise, and fund measures such as a VAT cut through spending cuts or tax rises elsewhere, the effectiveness of any stimulus would be dramatically reduced. Yet until now, Miliband has refused to concede as much. 

Now he has finally done so, the task for Labour is to persuade the public that borrowing for growth, at a time of stagnation and rising unemployment, is the right (and responsible) thing to do. Today's ComRes poll for the Independent, showing that 58 per cent of the public believe that the government's economic plan has failed and that it will be "time for a change" in 2015 is a reminder of the appetite for an alternative. 

The difficulty for Labour is that the Tories' argument that "you can't borrow more to borrow less" has a seductive appeal. But as anyone who has ever taken out a mortgage or founded a company knows, it's not true. As families struggle to find affordable housing and adequate employment, Labour should make the argument that now is precisely the time for the government to take advantage of record low interest rates and borrow to invest. To the charge that it is burdening future generations with debt, the party should reply: what kind of country will our children inherit if we don't build more homes, create more jobs and protect the services we rely on? When the private sector is unwilling or unable to fulfil these duties, it falls to the state to intervene and act as a spender of last resort. As Nye Bevan once declared, government must never become a mere "public mourner for private economic crimes". 

The failure of Labour to make these arguments since 2010 means it has a significant political deficit to overcome. But if Miliband is to offer a genuine alternative to austerity, he must now resolve to do so. 

Ed Miliband delivers a speech on the high street in the town centre on April 25, 2013 in Worcester. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.