Labour MPs urge Miliband to make the case for borrowing to invest

Former cabinet ministers Peter Hain and John Healey argue that the party must make an explicit case for investment if it is to counter the Tories' attack lines before the election.

Ed Balls's recent confirmation that Labour will leave room to borrow to invest has led to a renewed assault from the right on the party's economic stance. A Times frontpage declaring "Labour’s spending spree to cost £25bn" and Danny Alexander’s subsequent claim that the party would add "another £166bn of borrowing" were a preview of the onslaught that the Conservatives and their proxies will mount in the run-up to the election. In 1992, it was the "tax bombshell" that sank Neil Kinnock and John Smith’s election hopes. The Tories believe that the "borrowing bombshell" will do the same to Miliband and Balls in 2015.

Faced with these attacks, as I write in this week's politics column, Labour's instinct remains to change the subject: to its pledge to achieve a current budget surplus, to the living standards crisis, to George Osborne’s failure to meet his deficit targets. Balls and his aides state both publicly and privately that no decision will be taken on whether to borrow for capital spending until closer to the election, when the state of the economy is clearer. But few in the party believe it will be possible for Labour to achieve its priorities – a mass housebuilding programme, universal childcare, the integration of health and social care – without doing so. As one shadow cabinet minister told me: "We all know that a Labour government would invest more." The question, rather, is a tactical one: when and how does Labour make the case for "good borrowing"?

In private, Miliband’s advisers argue that the voters are able to distinguish between borrowing to fund day-to-day spending and borrowing for investment, just as they distinguish between "borrowing to fund the weekly shop" and "borrowing for an asset like a house". But the Labour leader is not yet prepared to make this case in public. Since an ill-fated interview last year on Radio 4’s The World at One, in which he refused eight times to admit that Labour would borrow more than the Conservatives, Miliband has focused deliberately on market reforms that would not cost government money: freezing energy prices, expanding use of the living wage and restructuring the banking system. When he has made promises that would require new funding, such as the construction of 200,000 homes a year by 2020, the question of borrowing has been deferred.

But an increasing numbers of Labour MPs believe this ambiguity can no longer be maintained. As one told me, "if we wait until January 2015 before making the case, it will be too late to win the voters round." As all sides acknowledge, the party begins from a position of weakness. The Conservatives' framing of the crash as the result of overspending by the last government has succeeded in crowding out all alternative accounts. Having lost an argument about the past, the question now is whether Labour can win an argument about the future and the need for investment in those areas, such as housing and childcare, that support long-term prosperity. 

The former cabinet minister John Healey told me:

The terms of debate about borrowing are still dominated by the simple sloganeering from the coalition … I think we have to break that argument; there is clearly good borrowing and bad borrowing.

You don’t want to be borrowing as a government, or a household, or as a business in order to support day-to-day revenue spending. But there’s a strong principled argument for the value of borrowing to invest when you build up a long-term asset that will be paid for over the long-term, not least because those that pay for a road, a power station, a hospital, a new set of housing will also be those that benefit from it as they service the borrowing. That’s the basic principled case for intergenerational fairness and the rightness of borrowing for that purpose.

Governments, uniquely, have the position and the power to borrow at rates not available to anyone else. They can borrow at low rates for the long-term. And third, uniquely, it’s what governments do in order to pull their countries through bad times.

Another former cabinet minister, Peter Hain, similarly argued:

We ceded the territory in the months after May 2010 by being preoccupied with an overlong leadership election. We’ve got to win it back, basically. And the only way of winning it back is to be on the front foot.

He added: "Our big picture should be the capital investment in housing, with all the hundreds of thousands of jobs and apprenticeships that will create as well as meeting an essential demand. We've got to get that out. I think that argument can be won.

"The Tory-Lib Dems have successfully imprinted a big deceit on the public mind with the help of a largely compliant media, that the public expenditure crisis was all Labour's overspending, rather than the global banking crisis and managing the consequences of that. So we have ground to make up and it can be made up provided we're on the front foot." 

Healey urged Labour to turn the Tories’ household analogies against them:

Governments aren’t the same as families or households but you can make some of the same arguments in Thatcher-like terms. It makes sense to borrow to buy a house, especially if your mortgage payments are less than your rent. It makes sense to borrow money to buy a car if that allows you then to travel to take up a job that pays better and brings in more. Some of the same dynamics are there in good government investment for the long-term.

The case for borrowing to invest could be made more easily if Labour were to have what one MP calls a "fiscal Clause Four moment": an act that convinces voters it means what it says about "iron discipline". It is this ambition that explains Balls’s continued threat to withdraw support for High Speed 2 and the doubt over Labour’s commitment to Trident. But while the party continues its search for an emblem of fiscal responsibility, the Tories are remorselessly increasing their lead on this issue.

Rather than proselytising for borrowing, as Labour’s most ardent Keynesians propose, or entering an auction on austerity, as its most ardent fiscal conservatives suggest, Miliband’s ambition remains to shift the debate towards building "a different kind of economy", one beyond the traditional terms of exchange on tax and spend. In an era of depressed living standards, it is a gamble that may serve his party well. But if the next election proves more like its predecessors than many expect, he risks being left defenceless beneath the bombshell.

Ed Miliband looks on in his office at Portcullis House at the beginning of a meeting with German Foreign Minister Frank-Walter Steinmeier earlier this week. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era