On the day of last year’s Autumn Statement, as George Osborne’s chief of staff Rupert Harrison briefed journalists on its contents, a nearby Labour strategist texted me highlighting a line in the new OBR document: “Check out para 1.8 (page 6) of the main document. On projections of the share of GDP consumed by govt. Alarming…”. This apparently obscure reference went on to provide the basis for an entire new line of attack by Labour. The relevant section read: “Total public spending is now projected to fall to 35.2 per cent of GDP in 2019-20, taking it below the previous post-war lows reached in 1957-58 and 1999-00 to what would be probably be its lowest level in 80 years.” It was this finding that allowed Labour to warn that George Osborne would cut spending to its lowest level since the 1930s – before the creation of the NHS and comprehensive education.
To mark the start of this election year, Ed Balls takes up the charge in today’s Guardian, declaring that “There are moments in politics when, amid the fog of accusation and rebuttal, things suddenly become crystal clear. And it’s now clear that last month’s autumn statement was another of those rare defining moments – the day Chancellor George Osborne ceded the political centre ground to Labour”.
He adds: “In the runup to the autumn statement we all knew the ongoing squeeze on living standards was leading to a huge shortfall in tax revenues, throwing deficit reduction plans badly off track. What took everyone by surprise was that, in the face of forecasts that this loss of tax revenues would continue, Chancellor Osborne would choose to make up the shortfall with massively deeper spending cuts in the next parliament.”
The confidence with which Balls attacks Osborne on territory previously considered unfavourable for Labour is striking. But a clue is provided in the second line of his piece: “I remember well the speech in summer 2000 when the shadow chancellor, Michael Portillo, set out Conservative plans to cut public spending to fund tax cuts – the moment we knew they had lost the 2001 election.” As Gordon Brown’s former chief economic adviser, Balls recalls better than most that it was fear of Conservative cuts that handed Labour victory in 2001 and 2005.
It was awareness of this failure that led David Cameron and George Osborne to pledge in 2007 to match Labour’s spending plans in the next parliament (thus denying Brown “baseline” advantage). But the financial crisis and the resultant surge in the deficit led the Tories to abandon their commitment, instead promising an “age of austerity”. Their subsequent failure to win a majority is partly blamed by Osborne on voters’ fear of the cuts to come. Labour was able to warn (accurately, as it proved) that child benefit, tax credits, Sure Start and the Education Maintenance Allowance were all under threat.
By vowing to continue cutting even after the deficit has been eliminated, the Chancellor has provided the opposition with a new opportunity to depict him as a dangerous ideologue. Balls’s claim that Labour now owns the “centre ground” is supported by a recent ComRes/Independent survey showing that 66 per cent do not believe that cuts should continue until the deficit has been eradicated with just 30 per cent in favour. Polls have also long shown backing for the party’s pledge to impose higher taxes on the rich, such as a 50p rate of income tax and a mansion tax.
The challenge for Labour is combining its attack on Conservative cuts with the acknowledgment that it, too, would reduce spending. As Balls writes: “Let me be clear, including to those who would wish it were not so: Labour will need to cut public spending in the next parliament to balance the books.” Labour is left with precisely the dividing line that Brown wanted to avoid in 2010: good cuts against bad cuts. The SNP and the Greens are seeking to capitalise by attacking the party’s embrace of austerity. But Labour believes that a commitment to cut spending (albeit by far less than the Conservatives) is necessary to counter the fear that it would allow the deficit to rise and “crash the car” again. Just as only Nixon could go to China, so the party hopes that only it will be trusted to “balance the books” in a fair way.
Should fear of “Tory cuts” cost the Conservatives victory for a fourth time, Osborne will truly have been snared by his own creation.