You are in drastic need of an editor for your headline.

Earth to Duncan.

Sorry, but Labour did set out large cuts (£46bn in real terms) in the March 2010 budget. Though of course without giving any details.

http://www.guardian.co.uk/politics/2010/mar/25/alistair-darling-cut-deeper-margaret-thatcher

So it’s rather difficult to row back to your suggested position now.

I think the Labour Party was absolutely right, economically, to run the kind of deficits we did in 2008/09/10.

What is your view of the deficits Labour ran between 2002/3 and 2008?

A comparison between Alistair Darling’s and George Osborne’s respective prescriptions for paying down the budgetary deficit are set out graphically on this BBC website:
http://news.bbc.co.uk/1/hi/business/10390823.stm

Darling’s prescription would have entailed the government borrowing more and for longer because the pace of cutting public spending would have been somewhat slower.

Whatever else about the incidence of the spending cuts on poorer v well-off households or the regional impact of Osborne’s budget, the potential risk of steeper, early public spending cuts is that the economy will sink back into recession or stagnate if private sector spending and net exports don’t increase to make up for the cuts.

I’m not making some extraordinary, eccentric point here as it has been made with greater congency and at greater length by FT writers:

Martin Wolf: Two brave gambles in a huge fiscal tightening:
http://www.ft.com/cms/s/0/c4c18be4-7e5e-11df-94a8-00144feabdc0.html

Chris Giles: Osborne delivers kill or cure Budget
http://www.ft.com/cms/s/0/de6ba960-7dde-11df-b357-00144feabdc0,dwp_uuid=ec12e25a-624a-11de-b1c9-00144feabdc0.html

And The Economist also warns of the downside risks as well as providing a graphical comparison between the Darling and Osborne prescriptions:
http://www.economist.com/node/16439052

Thanks to Peter Mandelson’s ‘Third Man’, we now have it confirmed that Alistair Darling wanted to raise VAT and that Mandy too was opposed to ruling out any VAT hike. It’s clear also that Gordon Brown’s veto of the proposed VAT increase wasn’t the result of disagreement over the economics of it, but solely motivated by tactical, electoral considerations in the run up to the election.

Now the election is over, and the cat is out of the bag, there is no compelling need for Labour to continue to pretend that the VAT hike is a bad move. Except, of course, the compelling need of naked opportunism.

Whether on VAT, on cutting the deficit, or on the foolish insistence that we should continue wasting £6 bn of spending already identified as ineffective, what Mandelson’s book makes clear is that Labour’s pre-election economic policy wasn’t driven by principle or based on sound economic analysis but designed solely to lay down lines of difference with the Tories.

Now Labour finds itself trying to stretch the folly of its campaign tactics into opposition. Who will believe it?

@5: “Now the election is over, and the cat is out of the bag, there is no compelling need for Labour to continue to pretend that the VAT hike is a bad move. Except, of course, the compelling need of naked opportunism.”

There is the continuing risk, recognised by FT economic journalists, that with the scale and speed of spending cuts and tax hikes spelt out in Osborne’s budget of 22 June, the economy could sink back into recession or stagnate.

What matters is whether consumer spending, business investment and net exports will rise sufficiently to fill the gap left in total demand from the cuts in public spending.

“Britain’s trade deficit in May reached its widest level since before the collapse of Lehman Brothers in September 2008, underlining fears that the UK will not be able to export its way back to economic health.”
http://www.ft.com/cms/s/0/9c096f3e-8b36-11df-a4b4-00144feab49a.html?ftcamp=rss

The latest available official figures on business investment show that during the first quarter this year, it was running 7.7% lower compared with the first quarter in 2009:
http://www.statistics.gov.uk/pdfdir/bi0610.pdf

The buoyancy of consumer spending relates to the buoyancy of the housing market and trends in house prices. In yesterday’s news:

“Property prices will not recover for another decade and should be viewed as ‘risky assets’, according to PricewaterhouseCooper’s Economic Outlook report.”
http://www.telegraph.co.uk/finance/economics/houseprices/7886145/UK-house-prices-not-set-to-recover-for-another-ten-years-says-PWC.html

“Leading accountant Deloitte has warned that UK house prices will fall by a third by the end of 2010. In a report released today it says: ‘We now expect UK house prices to fall by about a third by the end of 2010 with severe adverse effects on household spending and investment.’”
http://www.thisismoney.co.uk/mortgages-and-homes/house-prices/article.html?in_article_id=448236&in_page_id=57#ixzz0tYly30BP

#5

1) I wouldn’t necessarily trust anything Peter Mandelson says or does
2) I haven’t read Mandelson’s book (have you read it already, or just going by what’s in the papers), but I seriously doubt there was a cabinet discussion where raising VAT was agreed, so it’s probably just Mandelson’s interpretation of a discussion he had with Darling.
3) If it was true that Alistair Darling was willing to go with a VAT rise, that doesn’t mean he would’ve been able to do it. There would’ve been a huge rebellion on this issue. Raising VAT is not something Labour governments do, and backbenchers and possibly even some frontbenchers would not have stood for it. It would’ve become a major faultline, like the 10p tax issue except worse and more immediate.

@ 7

Raising VAT is not something Labour governments do

They effectively did it in January this year when they restored the standard rate to 17.5% from 15%. Indeed, the scale of their increase in absolute terms (2.5p in the pound) is exactly the same as Osborne’s. And you, it seems, didn’t even notice!

“They effectively did it in January this year when they restored the standard rate to 17.5% from 15%. Indeed, the scale of their increase in absolute terms (2.5p in the pound) is exactly the same as Osborne’s. ”

Sure, but it was always made clear that the drop to 15% was a temporary measure. Saying Labour raised VAT is literally accurate but misleading in terms of their overall policy.

The Socialist Milliballs should follow the lead of a certain South American dictator and cut public transport, forcing everyone to use bikes or locally-produced motor vehicles.

Although that money goes into subsidising the 16 bank holidays per year and subsidised Waitroses, but that’s another story altogether.

Policies breakdown: http://bit.ly/chvza

@7: “1) I wouldn’t necessarily trust anything Peter Mandelson says or does”

Why does it matter what Mandelson or other Labour pols said or didn’t say? Personally, I couldn’t care a fig.

What really matters is the economic fundamentals. Debating over what Labour pols might have said is just another exercise to deflect attention from the very real potential consequences of Osborne’s budget,

@2: Yes, and I think that was too fast. Labour will have a new leader and new Shadow Chancellor, I don’t why they have to be bound by the previous policies.

@3: Ideally Labour won’t have run them.

@11: “What really matters is the economic fundamentals. Debating over what Labour pols might have said is just another exercise to deflect attention from the very real potential consequences of Osborne’s budget,”
Exactly!

Well if Labour’s entire strategy is to be based upon hoping for a second downturn, I’m all for it!

@13: Two things. First I don’t set Labour strategy. And more importantly – it’s not. I’m simply saying that the actions in the budget make a second downturn more likely. And Labour should point this out. If we get a boom, then yes. let’s cut the deficit. But I doubt we will.

And I’m not the only one arguing the budget makes a double dip more likely. Those crazy lefties at the OBR agree.

http://www.guardian.co.uk/business/2010/jul/13/double-dip-recession-budget-obr-warning

“logically increased the possibility of a double dip” is the exact quote, well, it’s hard to diagree with that, though the OBR is still forecasting 2.3% for 2011, in line with current consensus

Of course there are risks on both sides, but it strikes me as an easily dismissed attack given the obvious response is “well, you were going to do – more or less – the same”.

PS and I don’t know why Lab would want to ditch Darling who must easily be the most reasonable/presentable bloke you’ve got by miles!

cjcjc,

Darling has announced he wants to stand down.

S&P also thinks the OBR is too optimistic.

http://www.telegraph.co.uk/finance/economics/7886242/UK-dealt-rating-blow-as-economic-growth-fears-mount.html

That’s a loss.

Chaise Guevara @ 9

Saying Labour raised VAT is literally accurate but misleading in terms of their overall policy.

And saying that raising VAT 2.5p in month 7 posed no risk at all of derailing the recovery, but raising VAT by the same amount in month 19 of the recovery seriously risks causing a double-dip recession is seriously dishonest.

@13: “Well if Labour’s entire strategy is to be based upon hoping for a second downturn, I’m all for it!”

The relevance of Labour’s political strategy to economic events is highly marginal since the chances of there being another UK general election within the next five years are very small. For me, internal Labour Party disputes about policy are as interesting as medieval debates about the numbers of angels who can be accommodated on a pinhead. Of far greater moment is this op-ed column in Tuesday’s FT by Ian Bremmer and Nouriel Roubini: Sagging global growth requires us all to act quickly:
http://www.ft.com/cms/s/0/eaf81fbe-8de3-11df-9153-00144feab49a.html

Prof Roubini was among those economists who predicted the financial crisis 2007-09 so I’m inclined this warning seriously.

“And saying that raising VAT 2.5p in month 7 posed no risk at all of derailing the recovery, but raising VAT by the same amount in month 19 of the recovery seriously risks causing a double-dip recession is seriously dishonest.”

Well, maybe. But this is about consumer spending, which in itself is partly to do with consumer perspective. You cut VAT for a few months, saying all along that that’s the plan, it’s perceived as a discount.

Stores don’t even bother changing their prices at the shelves: it’s easier, quicker and more effective in marketing terms to put big signs up saying “WE’RE PASSING ON THE VAT CUTS: YOUR PURCHASES WILL BE CHEAPER AT THE TILL”. Off the top of my head, I know both HMV and Primark did this, and it makes people see the cut as a kind of sale. Other shops keep their prices the same: in this case, it makes no more difference to the consumer when it goes back up than it does when it goes down.

I agree that, if you’re going to raise VAT by 2.5% then condemn your enemy for doing the same thing, you need some pretty good justification on your side. But I think this is one: Labour’s VAT rise didn’t take prices above what the consumer thinks they “should” be.

Interesting clips from news archives:

“Cameron’s ability to oppose Vat cuts will be hindered by the fact that Kenneth Clarke, the former Tory chancellor, said in an interview yesterday that such a move would ‘stimulate spending and consumer demand’. ”
http://business.timesonline.co.uk/tol/business/economics/pbr/article5213582.ece

“The government’s much-criticised cut in VAT is working and has led to a big boost in consumer spending, according to a leading economics consultancy.” [12 April 2009]
http://news.bbc.co.uk/1/hi/business/7995850.stm

VAT increase will not affect the electrical goods market.

This is the claim from John Browett who is not concerned by the impending VAT hike. Browett, who heads up Currys and PC World, said the effect of price deflation on technology products would offset the increase in VAT due to come in January 2011.

http://www.tax-advantage.co.uk/budget-news/vat-increase-no-affect-electrical-goods.html

Verdict expects the VAT rise in January 2011 to have little impact on the music and video market. (Datamonitor 4393)

Maybe people won’t notice this one either.

The problem for Labour is that they don’t really have a serious dispute with the Tories over the theory leading to the cuts. Certainly while there was still a possibility they might remain in power, they seemed to accept the basic neoliberal orthodoxy – that there must be deficit reduction and it must not involve significant tax increases on business interests or the wealthy. The difference between the parties seems to boil down to a judgement call over what level of deficit the economy can take before implementing these drastic cuts.

There is a risk of Labour ending up opposing reality, opposing the cuts while also opposing tax rises and opposing the deficit – a kind of economic NIMBYism. The cynic in me does suspect large chunks of the electorate wouldn’t necessarily see through that, and I suspect Labour party strategists (past form suggesting they have a generally low opinion of the electorate’s intelligence) might go for it. But seriously, they’ll not gain new credibility with intelligent people unless they can show an alternative plan.

@24: “There is a risk of Labour ending up opposing reality, opposing the cuts while also opposing tax rises and opposing the deficit – a kind of economic NIMBYism. The cynic in me does suspect large chunks of the electorate wouldn’t necessarily see through that”

C’mon.

“Tory support rises to 42 per cent in first post-Budget poll”
http://www.newstatesman.com/2010/06/support-poll-voters-election

Before the election Darling had planned cuts in public spending to pay down the deficit but the tightening wasn’t as steep as Osborne proposed in his budget on 22 June – see links @4 above for a comparion.

Post Budget, Darling warned that the greater extent of fiscal tightening in Osborne’s budget risks tipping the economy back into recession. Since then:

In Tuesday’s FT by Ian Bremmer and Nouriel Roubini: Sagging global growth requires us all to act quickly:
http://www.ft.com/cms/s/0/eaf81fbe-8de3-11df-9153-00144feab49a.html

As Prof Roubini was among those economists who predicted the financial crisis 2007-09, I’m inclined to take this warning seriously.

In Wednesday’s Daily Mail:

“Britain is more likely to suffer a double-dip recession as a result of the austerity measures outlined in last month’s Budget, the Treasury’s new watchdog said yesterday.

“The alert came from Geoffrey Dicks, of the Office for Budget Responsibility, who said: ‘There are some Budget measures which will have reduced demand. So the near-term outlook for gross domestic product is not as good as before the Budget.”
http://www.dailymail.co.uk/news/article-1294537/Budget-austerity-measures-make-double-dip-recession-likely-says-Treasury-watchdog.html?ito=feeds-newsxml#ixzz0tegkz6Tv