Labour needs to go much further on fiscal responsibility

The party should publish a series of potential fiscal rules for discussion and replace the VAT cut with a stimulus based on growth-raising capital investment.

Labour has made a start on re-establishing its fiscal credibility but it now must go further than any opposition has done previously – and soon. Recent announcements on fiscal responsibility and welfare reform were pivotal. Having accepted that it can’t simply oppose, Labour is now free to advocate a political approach that is genuinely different to that of the Tories – placing the pursuit of social justice, greater employment, pay and growth at the heart of a fiscally responsible agenda.

When a paper called In the Black Labour was published by Policy Network at the end of December 2011, there was a storm in the Labour teacup. The party started to move towards a fiscally conservative stance but that was soon reversed under some political pressure. Many critics accused the paper of adopting George Osborne’s fiscal and economic stance. This was strange given that Osborne’s strategy of austerity before growth wasn’t fiscal conservatism, but fiscal-self harm which has led to a series of missed deficit targets.

Having resumed the path to a fiscally responsible policy 18 months later, Labour now needs to go further. To ensure fiscal responsibility, while preserving counter-cyclical flexibility, Labour should publish a series of potential fiscal rules for discussion in the expert community, identify preferred public expenditure pathways under different growth scenarios and have these tested independently. Any stimulus would need to be focused on growth-raising capital spend. Therefore, questions should be asked about a stimulus based on a VAT cut, even if temporary in nature. Labour should consider dropping this policy – and soon.

In government, these choices should be monitored by a strengthened Office for Budget Responsibility, or Fiscal Council, who would assess whether government is likely to deliver on its fiscal rules, and to make recommendations if the targets are missed. These proposals mean Labour opening its plans to greater scrutiny at an early stage than any opposition has done before, while still allowing room for manoeuvre should growth hasten or slow. Such scrutiny will make it clear how little money there is, so spare resources must be focused on generating growth through capital investment, helping the unemployed into work, encouraging business investment, and promoting science, education and skills.

Shifting from short-term expenditure to long-term investment and developing sound fiscal rules to ensure sustainable debt levels will be useful tools to help deliver a reduction in debt. However, these measures alone will not be enough to advance social justice in an era of limited budgets.

It also poses questions for welfare policy. Housing has attracted particular attention but the challenge of containing housing benefit budgets is far wider. Yes, more houses are needed but incomes for the most vulnerable, in-work support for those with disabilities and high impact job brokerage, like that seen in Newham, are also required. It is in providing all these supports and services that welfare spending should be focused. None of this will be revolutionary but it will make a measurable difference – the politics of austerity are harder. Spending elsewhere, for example on support for the better off and on above-inflation pension commitments, will have to be reduced.

This also raises the question of tax revenue. From a purely fiscally conservative perspective, the mixture of tax rises and spending cuts is broadly irrelevant (despite fervent academic debates about this issue), so long as deficits are reduced. From the point of view of social justice, however, trying to deliver 80 per cent of deficit reduction from cuts would involve an unacceptable breach of our national social fabric and would, in all likelihood, prove counter-productive. If people are therefore going to be asked to pay more tax it becomes even more important to be open about constraints and choices at an early stage – consent must be earned. The radical realisation among the more savvy on the centre-left is that spending is no longer the shortcut to social justice that it once seemed.

The state still has significant levers. For example, we live in an economy populated by almost 5 million businesses – a 40 per cent increase in only a decade and a six-fold increase since the 1970s. The vast majority of these businesses are sole traders or micro-enterprises. Many are challenging the way big businesses operate with innovative approaches; many bring benefits to their communities that many larger operations struggle to emulate,  not least keeping the wealth they generate local. Yet big business enjoys all sorts of advantages over smaller business, including access to legal action, patent restrictions, expensive regulatory constraints, access to prime space, favour by government procurement and planning law.

Challenging the bias in favour of big business would help release the spirit of entrepreneurial activity in communities across the UK that would not just drive growth and innovation but allow a fairer distribution of wealth.

Labour could place itself firmly on the side of these millions of worker-businesses committed to creating as level a playing field as possible through planning reform, tax changes, access to intellectual property, finance, international markets and marketing support.

If Labour aims to focus resources on supporting growth, putting the economy on a sustainable long term footing and fulfilling the left’s mission of being on the side of the many, not the few, then social justice, economic efficiency and, indeed, fiscal conservatism will go hand-in-hand. The choices are hard, the solutions tougher, but that is the nature of pursuing social justice in fiscally and economically constrained times. It’s better to start early. Labour has now done that but it’s only a start.

Hopi Sen and Anthony Painter have co-written Moving Labour into the Black published by Policy Network with Adam Lent

Ed Miliband and Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.

Hopi Sen is a former head of campaigns at the Parliamentary Labour Party and blogs at www.hopisen.com

Anthony Painter is a political writer, commentator and researcher. His new book Left Without A Future? is published in July

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Rarely has it mattered so little if Manchester United won; rarely has it been so special they did

Team's Europa League victory offers chance for sorely needed celebration of a city's spirit.

Carlo Ancelotti, the Bayern Munich manager, memorably once said that football is “the most important of the least important things”, but he was only partly right. While it is absolutely the case that a bunch of people chasing around a field is insignificant, a bunch of people chasing around a field is not really what football is about.

At a football match can you set aside the strictures that govern real life and freely scream, shout and cuddle strangers. Football tracks life with such unfailing omnipresence, garnishing the mundane with regular doses of drama and suspense; football is amazing, and even when it isn’t there’s always the possibility that it’s about to be.

Football bestows primal paroxysms of intense, transcendent ecstasy, shared both with people who mean everything and people who mean nothing. Football carves out time for people it's important to see and delivers people it becomes important to see. Football is a structure with folklore, mythology, language and symbols; being part of football is being part of something big, special, and eternal. Football is the best thing in the world when things go well, and still the best thing in the world when they don’t. There is nothing remotely like it. Nothing.

Football is about community and identity, friends and family; football is about expression and abandon, laughter and song; football is about love and pride. Football is about all the beauty in the world.

And the world is a beautiful place, even though it doesn’t always seem that way – now especially. But in the horror of terror we’ve seen amazing kindness, uplifting unity and awesome dignity which is the absolute point of everything.

In Stockholm last night, 50,000 or so people gathered for a football match, trying to find a way of celebrating all of these things. Around town before the game the atmosphere was not as boisterous as usual, but in the ground the old conviction gradually returned. The PA played Bob Marley’s Three Little Birds, an Ajax staple with lyrics not entirely appropriate: there is plenty about which to worry, and for some every little thing is never going to be alright.

But somehow the sentiment felt right and the Mancunian contingent joined in with gusto, following it up with “We’ll never die,” – a song of defiance born from the ashes of the Munich air disaster and generally aired at the end of games, often when defeat is imminent. Last night it was needed from the outset, though this time its final line – “we’ll keep the red flag flying high, coz Man United will never die" – was not about a football team but a city, a spirit, and a way of life. 

Over the course of the night, every burst of song and even the minute's silence chorused with that theme: “Manchester, Manchester, Manchester”; “Manchester la la la”; “Oh Manchester is wonderful”. Sparse and simple words, layered and complex meanings.

The match itself was a curious affair. Rarely has it mattered so little whether or not United won; rarely has it been so special that they did. Manchester United do not represent or appeal to everyone in Manchester but they epitomise a similar brilliance to Manchester, brilliance which they take to the world. Brilliance like youthfulness, toughness, swagger and zest; brilliance which has been to the fore these last three days, despite it all.

Last night they drew upon their most prosaic aspects, outfighting and outrunning a willing but callow opponent to win the only trophy to have eluded them. They did not make things better, but they did bring happiness and positivity at a time when happiness and positivity needed to be brought; football is not “the most important of the least important things,” it is the least important of the most important things.

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