The perception that Labour cannot be trusted to control the public finances has hardened into received wisdom. This might be unfair – Gordon Brown used to operate with considerable fiscal discipline and preach “prudence with a purpose” in the early years of the New Labour government – and it is largely a consequence of the aftermath of the financial crisis and the effectiveness of George Osborne’s rhetorical assault on Labour’s economic record. But it is a fact.
Distracted by a protracted and bitter leadership contest in 2010, Labour feebly allowed the Tory-led coalition to frame the fundamental economic argument as one of Labour profligacy v Tory competence. Fatuous and alarmist comparisons were made between Britain and Greece (which was trapped within the eurozone and, because it did not have an independent central bank, unable to use monetary policy to mitigate the effects of the downturn). While the Miliband brothers set about fighting each other, the Tories were winning over the British public to the view that Labour was to blame for the debt crisis afflicting the country.
It is this perception that Ed Miliband very belatedly attempted to address with his front-page manifesto promise of “fiscal responsibility”: that each of Labour’s policies would be fully funded and require no additional borrowing and that he would eliminate the deficit by 2020, notwithstanding another recession or economic crisis.
The trouble for Labour is that the public has very little trust in politicians’ promises or “vows”, which is why Nick Clegg is so loathed, why Labour has become so unpopular in Scotland, where the SNP styles itself as an anti-austerity party, and why Tony Blair has never been forgiven for the Iraq war.
Mr Miliband’s mission in politics is to reduce inequality and to use the tax system and structural reforms of the economy to close the gap between the richest and the rest of us. Polling shows that his crackdown on “non-doms” commands widespread public support even if it might not raise much revenue, as does a rise in the minimum wage. Yet it is a sign of Labour’s weakness that it has felt obligated to offset every policy in this vein with tough talk about cutting benefits and the deficit. Mr Miliband knows that his party is vulnerable to caricature as a group of old-school socialists.
By contrast, the Tories have been spraying around unfunded commitments as if they had been subject to a secret takeover by Scandinavians. Individual ministers may struggle to explain where the extra money pledged for the NHS will come from but Mr Osborne’s calculation is that his economic credibility is sufficiently strong that a little wooziness will be forgiven. In the Tory manifesto, however, the party has moved from the arena of unachievable promises to downright regressive ones. Inheritance tax is currently paid by 6 per cent of estates, so raising its upper limit will benefit only the wealthy. And while “Right to Buy” was popular in its first incarnation under Margaret Thatcher, it has had devastating consequences. The social housing stock was never replenished; it created a new rentier class (a third of Right to Buy homes are rented out) and the state now subsidises more working families to rent in the private sector, causing the housing benefit bill to swell. It is to Labour’s credit that it has pledged to tackle this crisis at its source – lack of supply – with a housebuilding programme. There is also a cap on rent increases and a mansion tax, a move towards the asset taxes for which we have long argued. Earned income for low and middle earners is taxed too heavily (as is consumption; VAT is a regressive tax) and unearned income and static assets too little.
If there is a lesson to take from the Tory and Labour manifestos, it is that both are intent on neutralising their perceived weaknesses. Labour will not admit that it would borrow to invest (a necessary flexibility, as all Keynesians would understand) nor set out where serious cuts would be, and the Tories will not explain how they intend to make £12bn of welfare cuts and more – their numbers are so absurd as to be almost beyond discussion. The war of the weak is ending with both parties trying desperately to feign strength.