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3 March 2021updated 05 Mar 2021 10:13am

Rishi Sunak and Keir Starmer are asking the same old question: Labour spending or Tory austerity?

The Chancellor’s hope is that the country may now have an appetite to reduce debt, leaving Labour in a potentially disastrous position.

By Stephen Bush

Much of the time, politics is an argument not over the answer but over what exactly the question is. Part of Theresa May’s failure in 2017 was that she was unable to keep the political conversation fixed on Brexit and that the election became dominated by the state of the country after austerity. Part of Boris Johnson’s success in 2019 was that the election was about Brexit rather than austerity and its consequences.

Keir Starmer’s aim is to make the condition of Tory Britain, rather than hot-button culture war issues, the central question at the next election. His party’s two biggest messages in recent weeks have been designed with this in mind. Shadow ministers have taken great pains to emphasise that this is the 11th year of a Conservative government, not just the second year of a Boris Johnson one. That was the golden thread linking otherwise unrelated speeches, from a detailed, wonkish address by the shadow secretary of state for defence, John Healey, on 26 February, to the pre-Budget scene-setter delivered by the shadow chancellor, Anneliese Dodds, to the media company Bloomberg.

[Hear more from Stephen on the New Statesman podcast]

Starmer and Dodds’s speeches also included a message that has caused consternation within the party: they signalled the leadership’s intention to vote against any increase in taxes, including on corporation tax – which the party committed to increase at the last election. The economic logic of Labour’s position is clear: in a downturn, governments should neither cut spending nor raise taxes, but instead focus on stimulating the economy until it returns to normal.

Part of the criticism is simply good old Labour factionalism. When Richard Burgon and Ian Lavery – Corbyn-era loyalists turned censorious backbenchers – criticise the leadership for not backing a tax hike in a recession, it’s not because they have suddenly converted to the cause of austerity but because they are determined to disapprove of almost everything Starmer does. Another factor is communication: Labour MPs warmed to the proposal after hearing its economic logic set out at the Parliamentary Labour Party’s virtual meeting on 1 March. The Labour leadership’s tendency to present its conclusions to the party after the fact – rather than first setting out their strategic thinking – can create confusion where none need exist.

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[see also: Polling: How do Labour voters want Keir Starmer to respond to the Budget?]

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Labour’s sound-bite is being asked to do too much: the party’s opposition to a corporation tax rise in a recession is being deployed as a sign of its pro-business credentials as well as part of its broader argument against trying to reduce debt during a downturn. Either argument works well, but when deployed together, they drown each other out. That said, the party’s internal divisions on this strategy don’t matter too much: the dull reality is that most Labour MPs support it (opposing a Tory budget is not a decision any of them agonises over).

A bigger problem arises for Labour if the Conservatives decide not to play to stereotype – and here, if nowhere else, Rishi Sunak is an obliging opponent. Like Starmer, he wants the next election to follow the same old Tory story: fiscally prudent Conservatives against a spendthrift Labour Party. Some Conservative MPs fear that raising taxes will upend everything the party stands for and stymie the economic recovery. But Sunak has impressed upon them that in 11 years of office the party has consistently retained its lead over Labour on economic issues – and the appearance of frugality is a prerequisite to staying in power for a fifth successive occasion.

One important difference between the decade of austerity that has passed and the new one that may be beginning is the methods deployed to achieve it. Austerity under George Osborne and Philip Hammond largely took the form of spending cuts; austerity under Sunak will largely but not exclusively consist of tax rises. (One commonality is that local government finances will continue to be under strain.) The Chancellor expects to have to raise taxes partly because the spending commitments – on schools, policing and hospitals – that his party made to defeat Jeremy Corbyn in 2019 will have to be topped up with further measures to repair the economic and social damage inflicted by lockdown. His hope is that a country fed up with the consequences of spending cuts may now have an appetite for tax rises to reduce the country’s debts.

That might leave Labour in a disastrous political position, in which the tax increases it has earmarked to fund its policy priorities have been snatched by Sunak to reduce the country’s debts. This would make the next election a choice between high taxes under the Conservatives and yet higher ones under Labour, not least because both parties continue to agree that, in normal times, day-to-day spending must be funded with revenue, not debt.

While most economists are more closely aligned to Starmer’s approach than Sunak’s, the media still favours the idea that the UK’s debts need to be attended to sooner rather than later, and that frugality is the only sensible response to a period of increased borrowing. The Labour Party can point to the host of institutions that would side with Dodds over Sunak – the OECD, the IMF and so on – but the most important one in British politics is the BBC, and austerity-based arguments are still generally treated as established truths on the airwaves.

It’s certainly possible that the political mood and not just the economic consensus has moved towards Labour, and that Sunak is rushing into an argument that now favours the opposition. But it’s also possible that a contest in which voters are asked to choose between austerity under the Conservatives and investment under Labour ends the same way as the elections of 2010, 2015, 2017 and 2019.

[see also: Why Rishi Sunak’s Budget will be politically dangerous for Labour]

This article appears in the 03 Mar 2021 issue of the New Statesman, Humanity vs the virus