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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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”