Leader: The new realism

The challenge is to build, within those constraints, a project that is distinct from the coalition’s offer of slow immiseration for the many and impunity for the few.

Ed Miliband and Ed Balls have been forced to acknowledge their tricky position on the wrong side of public opinion on two vital questions. On the economy, there is suspicion that excessive spending by the last government is the cause of current misery. On welfare, many voters think that Labour presided over a system that rewarded idleness.

The challenge for the party leadership is to recognise the public mood without accepting so much blame as to do the Tories’ work for them. In co-ordinated speeches, the two Eds have set about that task. Mr Balls has clarified his approach to the public finances in the light of bleak forecasts. He does not envisage a future Labour government spending more in its early years than the coalition plans to do. Meanwhile, Mr Miliband has set out new ideas about social security that emphasise the link between contributions paid in and benefits paid out. This is to address the charge that the system doles out “something for nothing”. Labour has also accepted that the total welfare spend will have to be capped and that certain coalition cuts – say, to child benefit – would not be reversed.

One concern is that making benefits more conditional than universal is an intellectual surrender to enemies of the welfare state. There is also anxiety that oaths of fiscal discipline are a conversion to Conservative economics.

Those concerns can be assuaged. The principle of universal welfare does not dissolve in targeted cuts. The greater threat is a decline in the perceived legitimacy of taxpayer-funded benefits, a process that is accelerated if Labour cannot articulate voters’ concerns. Likewise, Labour cannot credibly offer an alternative to the coalition without acknowledging fiscal constraints.

The challenge is to build, within those constraints, a project that is distinct from the coalition’s offer of slow immiseration for the many and impunity for the few.

Labour’s new realism about spending limits is a necessary step towards winning over sceptical voters – but if it represents the limits of its imagination as it attempts to create a new political consensus, then the party is in trouble.

This article first appeared in the 10 June 2013 issue of the New Statesman, G0

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.