16 November 2010


I get the horrible feeling that the past fortnight has defined Labour’s response to the coalition government’s cuts programme – and that it is to take the line of least resistance.
I’m not talking about the frosty official Labour response to last week’s demonstration against higher education cuts (and fee increases) that ended with student anarchists and others trashing the Tories’ HQ building and one of them throwing a fire extinguisher at the cops from its rooftop. No one would expect any mainstream political party in Britain even to say – truthfully - that the fracas got the protesters publicity that they would otherwise have missed or to admit that the demonstrators expressed an anger that is widespread.

No, the important evidence is in dry policy speeches, notably this one from Alan Johnson, the shadow chancellor, and interviews by Johnson and other senior Labour figures. (The key Johnson interview was in the Times, so no link.) The line from Johnson and the rest is that the government is lying when it claims it was left a dreadful economic legacy by Labour and that it is cutting too hard and too fast – but that the rationale for the cuts (and for “welfare reform”) is essentially sound.

Fair enough on the first part, but, I’m sorry, the rest is selling the pass. The historian Ross McKibbin has an excellent piece in the current London Review of Books in which he makes several salient points:
To the historian, especially of the 1931 crisis, the whole thing is sadly familiar. There is the same paralysis on the part of the Labour Party (which might now wonder whether a four-month leadership election was really a good thing) and everywhere the same ramped-up rhetoric: the country is on the edge, going bankrupt, capital will flee, and it is all Labour’s fault. And this time, as in 1931, there is much that is spurious. The country is not on the verge of bankruptcy. There is no evidence that the bond market was reacting against British debt, despite the best efforts of the Conservative Party to encourage it to do so. Our fiscal position was never like that of Greece, which had cooked the books and was struggling to cope with short-term government debt, though Osborne et al insisted it was.

Why was it necessary to take such drastic action at all? Our debt ratio was much higher after the Second World War and neither Attlee nor Churchill felt any obligation to do what Cameron, Clegg and Osborne have done. Even Darling’s proposed schedule of deficit reduction seems excessively prudent. A less political chancellor might simply have allowed economic recovery (i.e. increased tax returns to the Treasury), modest reductions in new spending and inflation to deal with the debt…

I doubt that the cuts have very much to do with the economy: if they did they would have been more plausible and less risky. It is very unlikely that Osborne, if asked, could give any economic rationale for them. Nor could the Conservative MPs who cheered and waved their order papers when he had finished telling them that everything was going to be made significantly worse. The importance of the cuts is not economic but political and ideological…

The notion that the state should conduct its own finances in the manner of a prudent household has always been thought plain common sense by many voters (though no one in the Treasury would agree), even if in the last 20 years the electorate has conducted its affairs anything but prudently. Thus from the point of view of a rather rudderless Tory Party the very hugeness of the cuts is an advantage: they magnify the crisis and Labour’s recklessness in causing it. Further, they restore a sense of authority to the Conservative Party and to its interpretation of British politics and society, something it has lacked for a long time. That the cuts are promoted by a coalition government including the soft-hearted Lib Dems is an added advantage. It shrouds the Thatcherism of the exercise in a cloak of fairness.
The coalition is arguing for a cuts-to-tax-increases ratio in its consolidation programme of 80:20, with the axe to come down as soon as possible to eradicate the deficit in the lifetime of a parliament. Before the election, Labour was going for 67:33 cuts-to-tax to halve the deficit over four years; today it is arguing for 50:50. But even 50:50 to halve the deficit over four years is unnecessarily draconian. Why not 40:60, as advocated by Ed Balls during the Labour leadership contest, or even 30:70, with the bulk of tax increases being paid by the top 20 per cent of earners, by the wealthy and by banks? And why over four years and not six or even eight?

A cynic would say that 50:50 over four years is simply to keep Peter Mandelson and other New Labour nostalgics from sabotaging Ed Miliband’s leadership by banging on about the impossibility of selling tax increases to “aspirational” middle England. John Rentoul explained it rather more generously in the Independent on Sunday, where he praised Labour’s “Tardis” strategy, according to which “the way to win the next election is for the party to imagine itself into the future … Imagine it is November 2014; the general election is six months away. How has the opposition party demonstrated its economic credibility?”

I'm not convinced. OK, it makes sense for Labour to think long-term and to avoid hostages to fortune. Economic credibility is undoubtedly a Good Thing. But we don't know what the state of the economy will be in 2014 and what will then count as “credible”; and the most obvious hostage to fortune in current circumstances, with recovery weak and imperilled by the likely impact of spending cuts in reducing demand in the economy, would be a commitment to over-hasty and over-severe austerity.

The real danger for Labour, in short, is not that it appears insufficiently keen on cuts but that its timidity in questioning the fundamental assumptions of the coalition's slash-and-burn assault on the welfare state will render it incapable of benefiting from popular anger at the effects of government policy. I hope I'm wrong, but the party currently looks as if it is sleepwalking into a trap.

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