Why Labour can't and won't go on a "spending spree"

Balls has left himself with room to borrow to invest but the party's fiscal rules mean total spending will be falling for almost every year of the next parliament.

Was Ed Balls's latest commitment to fiscal responsibility just smoke and mirrors? That's the suggestion on the front of today's Times, which declares "Labour’s spending spree to cost £25bn". The paper reports that the party has "quietly drawn up spending plans that would allow it to borrow £25 billion more than the Tories after the next election, despite promising to match George Osborne’s pledge of clearing the deficit.

"A 'sleight of hand' by Ed Balls means he would be able to slow the pace of public cuts proposed by the Tories, opening up a further ideological divide between the two parties."

This refers to the fact that while pledging to eliminate the current budget deficit by the end of the next parliament, Labour has left itself with room to borrow for capital spending (unlike George Osborne, who has vowed to achieve an absolute budget surplus by 2020 at the latest). Judging by the Times's report, you might assume that Balls had hidden this fact. But the reverse is the case. Labour isn't matching the Conservatives' pledge to eliminate the total deficit and Balls was careful not to suggest otherwise. As he said in his speech at the Fabian Society conference last weekend, 

I am today announcing a binding fiscal commitment. The next Labour government will balance the books and deliver a surplus on the current budget [emphasis mine] and falling national debt in the next Parliament. So my message to my party and the country is this: where this government has failed, we will finish the job...We will get the current budget into surplus as soon as possible in the next Parliament. How fast we can go will depend on the state of the economy and public finances we inherit.

There was no "sleight of hand". 

Most of the media didn't bother to distinguish between current (day-to-day spending on public services, e.g. teachers' salaries and hospital drugs) and capital spending (investment in assets such as housing and roads) but the difference was there for those paying attention. 

Labour's position remains that it will make a formal decision on whether to borrow for capital spending closer to the election when economic circumstances are clearer. As Balls said in my recent interview with him, "In the speech I gave at Reuters in the summer, I said, and Ed and I both said, that’s a decision we should make much closer to the election when we’ve got more information about what the state of the economy is going to be. So we’ve been very clear, no more borrowing for day-to-day spending, but on the capital side that’s something that we’re going to continue to look at. I’m not going to rule it out, but I’m also not going to say now that it’s definitely the right thing to do."

So while there has been no deception from Balls, is he still planning a "spending spree" if he's back in the Treasury after May 2015? Again, the answer is no. As well as promising to eliminate the current budget surplus, Balls has also pledged to ensure "falling national debt" (as a proportion of GDP) in the next parliament. This second fiscal rule, which includes both current and capital expenditure, means that Labour won't be able to "spend like drunken sailors" regardless of what some on the left would wish. Total spending, the lion's share of which is current expenditure, will be falling for the majority of the next parliament. As the Times's own Daniel Finkelstein noted in his column yesterday, Labour is now committed to "a very difficult period of deficit reduction". Has the party left itself with room to spend more than the Tories? Absolutely. But there will be nothing resembling a "spending spree".

Of course, were there to be another financial crisis or a similar disaster, it's possible that Labour would abandon one or both of its fiscal rules (as Gordon Brown did in 2008 and as George Osborne did in 2012) but that wouldn't be a spending spree but an acknowledgment of economic reality. 

That the Times has taken none of the above into account has infuriated the party this morning. Labour has long been angered by what it views as the paper's increasingly partisan coverage under new editor John Witherow (a front page last year declaring "Labour engulfed by Co-op scandal" provoked particular ire) and today's splash will only worsen relations. 

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

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.