How Labour can credibly pledge to outspend the Tories

While restricting current spending, the party should promise to invest the proceeds of growth into future-facing areas like skills, childcare and infrastructure.

Labour must make a fundamental choice; whether to broadly accept George Osborne’s fiscal plans or commit to spending more. Until that decision is made, the question of whether Labour is tacking to the left or hugging tight to the coalition will remain unanswered: 'follow the money', to use the old Watergate maxim.

A Fabian Society commission has spent the last year examining this choice by considering the impact of rolling forward the chancellor’s current plans, as well as asking how much more it might be possible for a future government to spend and what that money might do.

The inquiry concluded that the coalition’s existing plans for 2016 and 2017 would translate into an almost unthinkable decline in public provision. Councils would be able to deliver little more than their statutory social care and refuse collection duties. Some government departments would end up with less than half the budgets they started with in 2010. And a further round of deep social security cuts would be needed, with George Osborne’s proposal to remove benefits from young people only the start.

A future government should do everything it can to avoid making these choices, but it must also remain totally committed to deficit reduction, for both economic and political reasons. That leaves a tight-rope to walk, between fiscal denial and spending cuts which will cause huge harm. Exactly how much more money a future government will be able to spend will depend on how well the economy is doing, because rising GDP feeds through into extra tax revenue. But the Fabian commission concluded that any party wishing to offer a convincing alternative to the coalition should aim to spend £20bn more in 2017 than the government now intends.

This would be enough extra money to avoid the worst of the pain scheduled for after the next election. But an incoming government would still need to make some hard decisions, which could prove very uncomfortable for Labour activists. For example, it would probably be possible to avoid big new cuts, but most departments would see spending frozen or increased by inflation only. The government would also need to find money from social security, so some entitlements would need to be cut unless economic recovery creates unexpected savings. There will almost certainly need to be a debate about 'least bad' benefit cuts, with fresh attention to some of the more marginal pensioner benefits.

Labour won’t win the argument, however, if the fiscal debate is just about spending 'more' or 'less'. The left also needs to set out the positive case for spending, by arguing that the composition of public expenditure must change. Under the coalition, the spending priorities have been healthcare and pensions. Both are very important, but without enough money to go round, the result has been deep cuts to the sort of future-facing spending which brings long term prosperity: skills, childcare, infrastructure, innovation and job creation.

The Fabian commission proposes that in 2016 and 2017, spending on these areas should receive the same special protection as the NHS budget does today. It also argues for a permanent increase to capital spending. With these reforms a future government could show that higher expenditure is the only way to spend on the future without sacrificing the vulnerable, old and sick of today.

Labour will no doubt worry about the political attacks it will face if it is to promise more spending. And it is true that some of the extra money would probably need to come from tax rises, although these can be limited to high income groups. For example the Fabian commission heard that many billions could be saved through reform of pension tax relief, so that rich workers only receive the same public subsidy for each pound they save as everyone else.

But the improving economic outlook also offers some cover for the proponents of higher spending, since projections for tax revenue will soon be revised upwards. The coalition seems likely to commit the money to accelerating deficit reduction or pre-election tax cuts. Labour can promise an alternative; to recycle the 'proceeds of growth' into productive, pro-growth public expenditure. A promise to spend more after 2015 need not be seen just as a shift to the left. It is also a commitment to Britain’s long-term future.

2030 Vision: The final report of the Fabian Society Commission on Future Spending Choices is published today. Read it on the Fabian Society's website here 

Ed Miliband and Ed Balls at the Labour conference in Brighton last month. Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.