Balls reaffirms Labour's commitment to cuts in 2015

Labour states unambiguously that it will be "cutting departmental spending in 2015-16" and will not borrow for "day-to-day spending".

While Labour's "cost-of-living" offensive has allowed it to reframe the economic debate in its favour, senior figures in the party know that it will struggle to win a majority unless it can convince voters that it can be trusted to spend money wisely. As Ed Balls says in his interview in today's FT, "Unless we can show . . . that we’ve got a plan which will work, the public won’t think that we will solve the cost of living crisis". 

To prove that Labour does have such a plan, Balls has launched the first phase of his "zero-based" spending review today. A zero-based review differs from others by requiring every item of spending to be approved, rather than merely changes to a pre-determined baseline. In other words, nothing is off the table. Labour plans to scrutinise spending in every area, including those protected by the coalition: the NHS, schools and international development. The document contains the most explicit statement yet that the party will cut departmental spending in 2015-16 and will not borrow to meet day-to-day spending:

We will be cutting departmental spending in 2015-16 and not raising it, with no more borrowing to cover day-to-day spending
The deficit forecasts might be slightly less dreadful than before (the OBR now expects the deficit to be £79bn in 2015-16 compared to £96bn in March; its 2010 forecast was £20bn), but the OBR's judgement that the improvement in the public finances is almost entirely cyclical means that the structural deficit (the part of the deficit that exists regardless of the level of economic output) is deemed to be no smaller than before; austerity cannot be avoided. 
 
But while Labour is committed to matching Osborne's departmental spending plans, there are many different ways to spend £313bn (the spending limit set by the coalition for 2015-16). While remaining within the Chancellor's fiscal envelope, Labour plans to identify "savings" and "switches" that better reflect its "priorities" (what Nye Bevan called "the religion of socialism"). As Balls suggested in his speech in June, this could include withdrawing funding for free schools in areas with surplus places, scrapping Police and Crime Commissioners, cutting the number of army officers and admirals, merging the four separate government motorist agencies, combining management functions in government departments, agencies, fire services and police forces, and requiring industries to contribute more to the cost of regulation. The party is also likely to vary the ratio of spending cuts to tax rises within Osborne's deficit reduction programme, for instance by reintroducing the 50p tax rate. 
 
These switch-spends and tax decisions will be included in Labour's manifesto, with a full Spending Review to follow after the election. It is also in the manifesto that the party will announce which areas, if any, it intends to ring-fence. This will almost certainly include the NHS. Polls show that it is the most popular spending area with voters and the above-average rate of inflation in the health service means it frequently requires real-terms rises just to stand still. With the Tories making it clear that they would continue to ring-fence the NHS after 2015, Labour has no intention of handing them an easy political victory. 
 
Here's the timetable for the zero-based review:
Phase 1 of the Zero-Based Review will involve the Shadow Chief Secretary and the Treasury team working with individual departments on a detailed response to the questions raised in this initial document. 
 
Phase 2 of the work will then identify initial savings and switches to reflect Labour's priorities and report before our manifesto. 
 
Phase 3 covering our first year in Government, will see the implementation of any immediate switches/changes to inherited plans and work on a full spending review for 2016-17 onwards. 
Two other points are worth noting. The first is that Balls has left himself room to borrow more than Osborne to fund investment in infrastructure, telling the FT that "any decision about capital" will depend on "the state of the economy". While polls show that voters are supportive of borrowing for areas such as housing, Labour will need to make the argument early enough to counter the inevitable charge from the Tories that it is planning more of the borrowing that "got us into this mess". 
 
The second is that the big fiscal question is not whether Labour will match the coalition's spending limits in 2015-16 (most governments deviate little from the plans they inherit) but whether it will remain within Osborne's envelope for the entire parliament. But for both political and economic reasons, don't expect an answer to that until after 2015. 
Ed Balls speaks at the CBI's annual conference on November 4, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The NS leader: Cold Britannia

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. 

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. The polls suggest a series of grim election defeats across Britain: Labour is 10 points behind the Conservatives even in Wales, putting Theresa May’s party on course to win a majority of seats there for the first time in a century. Meanwhile, in Scotland, the psephologist John Curtice expects the resurgent Tories, under the “centrist” leadership of Ruth Davidson, to gain seats while Labour struggles to cling on to its single MP.

Where did it all go wrong? In this week’s cover essay, beginning on page 26, John Harris traces the roots of Labour’s present troubles back to the scene of one of its greatest triumphs, on 1 May 1997, when it returned 418 MPs to the Commons and ended 18 years of Conservative rule. “Most pop-culture waves turn out to have been the advance party for a new mutation of capitalism, and so it proved with this one,” Mr Harris, one of the contributors to our New Times series, writes. “If Cool Britannia boiled down to anything, it was the birth of a London that by the early Noughties was becoming stupidly expensive and far too full of itself.”

Jump forward two decades and London is indeed now far too dominant in the British economy, sucking in a disproportionate number of graduates and immigrants and then expecting them to pay £4 for a milky coffee and £636,777 for an average house. Tackling the resentment caused by London’s dominance must be an urgent project for the Labour Party. It is one that Mr Corbyn and his key allies, John McDonnell, Emily Thornberry and Diane Abbott, are not well placed to do (all four are ultra-liberals who represent
London constituencies).

Labour must also find a happy relationship with patriotism, which lies beneath many of the other gripes made against Mr Corbyn: his discomfort with the institutions of the British state, his peacenik tendencies, his dislike of Nato and military alliances, his natural inclination towards transnational or foreign liberation movements, rather than seeking to evolve a popular national politics.

New Labour certainly knew how to wave the flag, even if the results made many on the left uncomfortable: on page 33, we republish our Leader from 2 May 1997, which complained about the “bulldog imagery” of Labour’s election campaign. Yet those heady weeks that followed Labour’s landslide victory were a time of optimism and renewal, when it was possible for people on the left to feel proud of their country and to celebrate its achievements, rather than just apologise for its mistakes. Today, Labour has become too reliant on misty invocations of the NHS to demonstrate that it likes or even understands the country it seeks to govern. A new patriotism, distinct from nationalism, is vital to any Labour revival.

That Tony Blair and his government have many detractors hardly needs to be said. The mistakes were grave: the catastrophic invasion of Iraq, a lax attitude to regulating the financial sector, a too-eager embrace of free-market globalisation, and the failure to impose transitional controls on immigration when eastern European states joined the EU. All contributed to the anger and disillusionment that led to the election as Labour leader of first the hapless Ed Miliband and then Jeremy Corbyn, a long-time rebel backbencher.

However, 20 years after the victory of the New Labour government, we should also acknowledge its successes, not least the minimum wage, education reform, Sure Start, a huge fall in pensioner poverty and investment in public services. Things did get better. They can do so again.

The far right halted

For once, the polls were correct. On 23 April, the centrist Emmanuel Macron triumphed in the first round of the French election with 24 per cent of the vote. The Front National’s Marine Le Pen came second with 21.3 per cent in an election in which the two main parties were routed. The two candidates will now face off on 7 May, and with the mainstream candidates of both left and right falling in behind Mr Macron, he will surely be France’s next president.

“There’s a clear distinction to be made between a political adversary and an enemy of the republic,” said Benoît Hamon, the candidate of the governing Parti Socialiste, who had strongly criticised Mr Macron during the campaign. “This is deadly serious now.” He is correct. Mr Macron may be a centrist rather than of the left but he is a democratic politician. Ms Le Pen is a borderline fascist and a victory for her would herald a dark future not just for France but for all of Europe. It is to Donald Trump’s deep shame that he appeared to endorse her on the eve of the vote.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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