Whoever the next Labour leader is, he or she will not gain control of the nation’s purse strings if voters don’t trust us to use it responsibly. Currently the debate seems to be whether the best way to regain economic credibility is by talking Tory lite or by redefining what is meant by responsibly. I’ve previously argued that when it comes to business we need a better choice than between another prawn cocktail offensive or hoying insults from the barricades. Equally, on the economy we need a leader who can take on Osbornomics and win.
George Osborne’s budget was a pitch for perpetual austerity. He has gone one better than Margaret Thatcher, he is not saying a smaller state is desirable, he is saying it is obligatory. The continued slashing of public sector spending combined with outlawing borrowing “in normal times” basically means sweating the country’s assets to get the last drop out of them and only investing when times are bad.
The Osbornomic farmer wouldn’t borrow to buy a tractor unless crop prices were falling. The Osbornomic househunter would not take out a mortgage unless her salary was being cut. The Osbornomic CEO would only invest in a new product line when revenues were falling.
Businesses which simply milk their assets go under. The same is true of countries, Osbornomics will blight the lives of the vast, vast majority to enable a lucky few to reap huge rewards. Osborne’s narrative of fixing the roof whilst the sun shines is simple and attractive but also narrow and without ambition – we need to be building for the future as well as fixing what’s gone wrong. That is what successful companies do. Indeed Apple has billions of dollars of cash stashed out of the reach of the American taxman but is still borrowing money.
Now I would be the last to say we should model our fiscal arrangements on Apple nor am I suggesting we announce spending plans for some political iWatch or indeed commit to a continual deficit – as Cruddas and Glasman recently emphasised there is nothing progressive about being in hock. But I do believe economic policy should have some basis in fact. Osborne’s ‘all borrowing is bad’ does not. I’m not the only one who thinks so – 77 of the world’s best known economists condemned Osborne’s proposals. Andy Burnham called our party too timid and I fear if we cannot call out the Tories on their economic dogma we are. It’s not prudence it’s ideological rigidity.
As the economist Mariana Mazzucato has comprehensively set out, without a vision of the role of the state reducing public spending can only be about reducing the size of the state – it does nothing to demonstrate that the spending which is maintained is actually value for money and/or achieving its objective – as one hasn’t been set. Under Osbornomics we may be spending less but we could still be spending badly.
The fact is you cannot have an economic policy divorced from the interests of the people who work in the economy nor a successful social policy which ignores the businesses and companies which people work for, buy from and let into their homes. The last Labour government was happy to support business in order to pay for public services – or, as Peter Mandelson put it, “intensely relaxed with people getting filthy rich as long as they pay their taxes”. But after the financial crash Mandelson rediscovered respect for the state with his new industrial policy recognising a relationship which is a not merely one of funder and regulator.
Building a partnership between the public and the private sector is not only a question of equity. President Obama’s Chief Economic Advisers, Jason Ferman’s work on the relationship between equality and growth demonstrates that an economy that doesn’t promote equality is unsustainable.
The leadership contenders have yet to set out economic stalls which are both visionary and comprehensive. Jeremy Corbyn nods to “the wealth creators” but he clearly sees the economy and social good as in conflict – he criticises Europe for being too economically driven rather than for following the wrong economics. Liz Kendall recognises they are connected but appears to see the economy – business, companies, taxes – as there to pay for the ‘good’ society not co-dependent with it. Yvette Cooper emphasises the importance of investment, science, and technology but not the role of the state. Andy Burnham comes the closest in talking of public and private sector working together but without setting out what that means.
It is only with a combined vision for the State and the economy that we can take on Osbornomics. I believe people can grasp the difference between good borrowing and bad borrowing – most people have mortgages. But they fear Labour Governments will disguise the one with the other. That is not fair, when this Government is borrowing to pay benefits rather than building an economy with good jobs. But the public has no obligation to be fair to Labour. What we need then is to demonstrate that they will be able to hold us to account, not hide spending in dodgy deals or finance initiatives. Technology and opendata can be the friend of the people and the enemy of disingenuous Chancellors. We need to show that every pound spent can be tagged, justified, tracked and the return on it independently and objectively measured. Not an iWatch but a #smartspend. That’s a challenge but a more inspiring one than perpetual austerity.