Balls sharpens his axe: where Labour would cut in 2015

Free schools, Police and Crime Commissioners, Titan prisons and army admirals are targeted for cuts.

There were two main aims of Ed Balls's speech on the economy today. The first was to reassure voters that while continuing to support stimulus now, Labour would pursue fiscal responsibility in office. While refusing to play George Osborne's game by saying whether he would stick to the coalition's 2015-16 spending plans ("when we do not know the economic circumstances two months ahead, let alone two years"), he emphasised that, before the election, Labour would adopt its own fiscal rules to eliminate the current deficit and reduce the national debt as share of GDP. Balls also signalled that, with growth finally returning, he would soon abandon his expensive pledge to introduce a temporary VAT cut (which Ed Miliband had such trouble defending in his infamous World At One interview) in favour of long-term capital investment. He said: 

Today, with growth prospects still very uncertain and interest rates too low to be of use, a temporary VAT cut now is still the right prescription before extra capital spending can come on stream – although any immediate tax cut which helps middle and lower income families is better than nothing. 

But over the coming year if, as we all hope, some kind of recovery does take hold, then the balance of advantage will shift from temporary tax cuts to long-term capital investment.

The second aim was to begin the task of forcing the left to accept that not only will Labour be unable to reverse most of the cuts imposed by the coalition, it will have to make its own. As Balls pointedly noted, "The next Labour government will have to plan on the basis of falling departmental spending."

The announcement that Labour would remove the winter fuel allowance from the wealthiest 5 per cent of pensioners is pretty small beer. While Ed Miliband's abandonment of universalism is politically significant (it opens the door to further benefit cuts), the move will save just £100m a year (less than half a per cent of the £207bn welfare bill), meaning that it barely qualifies as a rounding error. But Balls went on to outline, in greater detail than before, other, larger cuts and efficiency savings that a Labour government would seek to make. Since the shadow chancellor wants to give himself maximum flexibility in 2015, they were proposed in the form of questions (as was the winter fuel allowance cut) but, for now, they are the best guide we have to where Balls's axe would fall. Here's my summary:

- Not opening new free schools in areas with excess places. Balls derided "vanity schools projects" and suggested that Labour would not open new free schools in areas with a surplus of secondary school places. ("With primary school places in short supply in many parts of the country, and parents struggling to get their children into a local school, can it really be a priority to open more free schools in 2015 and 2016 in areas with excess secondary school places?")

- Scrapping Police and Crime Commissioners. ("When we are losing thousands of police officers and police staff, how have we ended up spending more on police commissioners than the old police authorities, with more elections currently timetabled for 2016?")

- Cancelling the new 2,000-place "Titan" prison recently proposed by Chris Grayling. ("Has the Ministry of Justice properly made the case for a major new 'Titan' prison, at a time when the prison population is falling?")

- Abolishing High Speed Two Limited, the company developing the new rail network. Balls suggested that this role could be performed more effectively by Network Rail ("Should we be spending millions on a separate company to deliver High Speed 2 when we already have Network Rail, which after all is responsible for rail infrastructure?")

- Cutting the number of army officers and admirals. ("Do we need more admirals than ships and more officers in our forces than our international counterparts at a time when frontline armed forces are under pressure?")

- Merging the four separate government motorist agencies. ("Do we really need four separate government agencies delivering services to motorists?")

- Combining management functions. in government departments, agencies, fire services and police forces. ("Does it really make sense to have separate costly management and bureaucracy for so many separate government departments, agencies, fire services and police forces - the same number as when this Government came into office - all with separate leadership structures and separate specialist teams?")

- Requiring industries to contribute more to the cost of regulation. ("Should industries pay a greater share of the costs of their regulators?")

The aim of these cuts and savings will be to free up funds for Labour's priorities (which Balls promised a "relentless focus" on): employment, housing, childcare, the NHS and social care. Based on his speech today, it is likely that Labour will go into the election promising to spend more than Tories in areas such as infrastructure (borrowing to invest), while giving itself the political cover to do so by adopting new fiscal rules, independently monitored by the OBR, and promising to control welfare spending (Miliband will announce his support for a cap on structural benefits, such as housing benefit, in his speech on welfare on Thursday). The defining political question is whether this will be enough to reassure a sceptical electorate, less than a third of whom believe Labour can be trusted to manage the nation's public finances, that it wouldn't "crash the car" all over again.

Ed Balls emphasised that Labour would have to plan "on the basis of falling departmental spending". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Chuka Umunna calls for "solidarity" among Labour MPs, whoever is voted leader

The full text of shadow business secretary Chuka Umunna's speech to Policy Network on election-winning ideas for Labour's future, and the weaknesses of the New Labour project.

There has never been an easy time to be a social democrat (or “democratic socialist” as we sometimes call ourselves in Britain). Whereas the right can demonise the poor and extol the virtues of the market, and the hard left can demonise the market and extol the role of the state, our position of constraining the domination of markets and reforming the state is, by definition, more complex.

It is nonetheless the case that social democracy has a historic responsibility, in every generation, to renew democracy and preserve a civic culture. This is achieved not through soundbites and slogans, but through the hard-headed development of a progressive politics that reconciles liberty and democracy, new comers and locals to our communities, business and workers, in a common life that preserves security, prosperity and peace.  This historic mission is all the more urgent now and my determination that we succeed has grown not weakened since our election defeat last May.

But, in order to be heard, it is necessary to make balanced and reasonable argument that both animates and inspires our movement, and which is popular and plausible with the people.  The first is pre-requisite to the second; and there is no choice to be made between your party’s fundamental principles and electability. They are mutually dependent - you cannot do one without the other.

We are in the midst of choosing a new leader and it is clear to anyone who has watched the UK Labour Party leadership election this summer that amongst a significant number there is a profound rage against Third Way politics – as pursued by the likes of Bill Clinton, Tony Blair, Gerhard Schröder and others - as a rejection of our fundamental values.

In the UK there is a view that New Labour accepted an uncritical accommodation with global capital that widened inequality, weakened organised labour and we were too close to the US Republicans and too far from the European left.

I do not believe this is fair, not least because we rescued many of our public services from the scrap heap when we came to office in 1997 and there were very significant achievements  we should celebrate.  New Labour renewed our National Health Service in a fundamental way; we built new schools and improved existing ones; we set up new children’s centres all over the country; we brought in a National Minimum Wage; we worked with others to bring peace to Northern Ireland; we introduced civil partnerships.  Just some of our achievements.

However, though we may take issue with the critique, I do not think we can simply dismiss out of hand those who hold critical views of New Labour. Like any government, the New Labour administration made mistakes - it could and should have achieved more, and done more to challenge the Right’s assumptions about the world. In the end, it is not unreasonable to be ambitious for what your party in government can achieve in building greater equality, liberty, democracy and sustainability. It is far better we acknowledge, not reject, this ambition for a better world, as we seek to forge a new politics of the common good fit for the future.

Realising our values in office has been disrupted by globalisation and the surge of technological forces that are displacing and reshaping industry after industry.

Some argue that globalisation as an ideological construct of the right. But we must recognise that we live in an increasingly integrated world in which markets have led to an unprecedented participation of excluded people in prosperity, a rise in living standards for hundreds of millions  of people and a literacy unprecedented in human history – this is particularly so in emerging economies like my father’s native Nigeria. And the internet has led to a level of accountability that has disturbed elites.

Yet, this has been combined with a concentration of ownership that needs to be challenged, of a subordination of politics that requires creative rather than reactive thinking, and these global forces have exacerbated inequalities as well as helped reduce poverty.

So it is important that we understand the sheer scale and impact of new technologies. At the moment we are engaged in a debate about Uber and its threat to one of the last vestiges of vocational labour markets left in London, those of the black taxi cabs and their attainment of 'The Knowledge'. But the reality is that within the next decade there will be the emergence of driverless cars so we have to intensify our exploration of how to support people in a knowledge economy and the realities of lifelong learning, as well as lifelong teaching. As people live longer we will have to think about how to engage them constructively in work and teaching in new ways.

Once again, I'm addressing all of this, Social Democracy requires a balanced view that domesticates the destructive energy of capital while recognising its creative energy, that recognises the need for new skills rather than simply the protection of old ones. A Social Democracy that recognises that internationalism requires co-operation between states and not a zero sum game that protectionism would encourage.

Above all, Social Democratic politics must recognise the importance of place, of the resources to be found in the local through which the pressures of globalisation can be mediated and shaped. Our job is to shape the future and neither to accept it as a passive fate nor to indulge the fantasy that we can dominate it but to work with the grain of change in order to renew our tradition, recognising the creativity of the workforce, the benefits of democracy and the importance of building a common life.  Sources of value are to be found in local traditions and institutions.

This also requires a recognition that though demonstration and protest are important,; but relationships and conversations are a far more effective way of building a movement for political change.

One of the huge weaknesses of New Labour was in its reliance on mobilisation from the centre rather than organising. It therefore allowed itself to be characterised as an elite project with wide popular support but it did not build a base for its support within the party across the country, and it did not develop leaders from the communities it represented. It was strong on policy but weak on strengthening democratic politics, particularly Labour politics.

Over half a million people are now members, supporters or affiliated supporters of our party, with hundreds of thousands joining in the last few weeks. Some have joined in order to thwart the pursuit of Labour values but many more have joined to further the pursuit of those values, including lots of young people. At a time when so many are walking away from centre left parties across the Western world and many young people do not vote let alone join a party, this is surely something to celebrate.

So it is vital that we now embrace our new joiners and harness the energy they can bring to renewing Labour’s connection with the people. First, we must help as many them as possible to become doorstep activists for our politics. Second, I have long argued UK Labour should campaign and organise not only to win elections but to affect tangible change through local community campaigns. We brought Arnie Graf, the Chicago community organiser who mentored President Obama in his early years, over from the U.S. to help teach us how to community organise more effectively. We should bring Arnie back over to finish the job and help empower our new joiners to be the change they want to see in every community – we need to build on the links they have with local groups and organisations.

I mentioned at the beginning that in every generation Social Democracy is besieged from left and right but the achievements of each generation are defined by the strength of a complex political tradition that strengthens solidarity through protecting democracy and liberty, a role for the state and the market and seeks to shape the future through an inclusive politics. Solidarity is key which is why we must accept the result of our contest when it comes and support our new leader in developing an agenda that can return Labour to office.

Yes, these are troubled times for social democrats. All over Europe there is a sense among our traditional voters that we are remote and do not share their concerns or represent their interests or values.  There is surge of support for populist right wing parties from Denmark to France, of more left wing parties in Greece and Spain and in Britain too. There is renewal of imperial politics in Russia, the murderous and abhorrent regime of ISIL in the Middle East, volatility in the Chinese economy and in Europe a flow of immigration that causes fear and anxiety.

But, the task of Social Democracy in our time is to fashion a politics of hope that can bring together divided populations around justice, peace and prosperity so that we can govern ourselves democratically. We have seen worse than this and weathered the storm. I am looking forward, with great optimism to be being part of a generation that renews our relevance and popularity in the years to come.

Chuka Umunna is the shadow business secretary and the Labour MP for Streatham.