Labour and ‘parking the deficit’ – counterproductive and a disaster


7:42 pm - January 15th 2012

by Sunny Hundal    


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Imagine you’re a Labour activist campaigning on the doorstep and you encounter someone complaining about cuts to their local services – perhaps SureStart, a library, care services or essential disabled care.

What do you say? A few months ago most Labour activists would have said they opposed the Tory cuts, and a Labour council or govt would have made some cuts but not to the same proportion or in the same way.

But Ed Balls speech yesterday apparently threw everything up in the air. The content didn’t change but the spin did. That makes opposition to the Tories even harder.

Let me start with my position: I have always maintained that if Labour were in government now they would have had to lay out a credible plan to reduce the deficit. That needs some cuts to spending; tax rises and a focus on tax evasion to increase revenue; and a focus on job creation to bring down unemployment and thus welfare spending.

Osborne’s strategy made the situation worse – the left has been vindicated on that. The VAT rise and the cuts depressed consumer confidence and spending, and most sensible economists now admit that (even at IMF and OECD). But the UK’s sluggish worsening situation makes cuts even more likely now*.

‘Parking the deficit problem’
Senior Labour strategists say that in order to move the discussion on to issues like jobs and growth, they first need to ‘park the deficit problem’. They point to the fact that despite sounding like they’re against all cuts in the media, Labour’s ratings on economic credibility haven’t gotten better.

Some go further and say the Labour top team avoided the problem for too long and this is better late than never.

Many on the left still say if Labour opposed the cuts strongly and coherently enough, they would convince the public. But this looks like wishful thinking when loud public opposition to the cuts (the TUC marches, strikes etc), with Labour sounding sympathetic, has failed to substantially crack public acceptance of cuts.

But Labour’s position hasn’t changed, only the spin has. In many cases they will oppose the cuts but cannot promise to reverse all of them. Richard Murphy is right – to predict and make promises on what the economy will look like in 2015 is just foolhardy.

As no one know what our finances will be like in 2015, and they’re not going to release a fully costed manifesto 3 and 1/2 years before an election. That means no promises either way right now.

Why this is still a disaster
The major problem is that this still comes across as muddled to the public, and the Tories will spin it as such. Labour say they oppose some cuts but cannot lay out which ones. Neither can they promise this early to reverse them, which means neither Labour activists nor the public are told a clear line.

Secondly, it is the wrong way around. If they were going to be so blunt on the deficit, they should have started with it 18 months ago and then moved to ‘squeezed middle’ and ‘responsible capitalism’. Now they’ll either have to come back to those topics later or send out mixed messages.

The third problem is that Tories won’t let them off so easily. They will simply say every time Labour oppose any cut (as Chris Grayling did on Newsnight recently), that Labour admitted the need to take ‘hard decisions’ on cutting the deficit but are now back-tracking.

They will also spin this as vindication for their narrative that Labour spent too much, and now finally admit it (See the rebuttal here). They will keep focusing on the deficit since it is fertile territory.

I’m willing to bet money all this positioning will have zero impact on economic credibility polling.

It’s simply absurd to think a narrow Labour discussion on deficit spending will increase Labour’s standing on the economy. Most people just don’t pay attention to policy detail.

To get the message across to the public they need to either take an extreme position (against all cuts or promising to double them) and make a big symbolic statement to reinforce that. But either position will start a civil war in the party.

Instead – as I keep saying – they shouldn’t pretend they can win on the issue. Yesterday’s confused argument – we have to accept Tory cuts will happen by 2015, and can’t promise to reverse them, but will still oppose them – just illustrates how more incoherent the narrative is becoming.

Either take a clear line or find strong ways to move on the issue. Carrying on with this debacle is not going to help Labour’s credibility one bit.

—-
* If you think the cuts are unnecessary and can entirely be covered by tackling tax avoidance then please show me some credible sums

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


I agree with most of this. For me the question of what the position *should* be depends on whether firstly we are sincere in our economics. Clearly Ed Balls believes that interest rates are low because of a flight to safety, that avoid depressed demand is critical, and that growth and low unemployment are key to cutting the deficit.

If that is so, we must also believe government policy will continue to lead to reductions in aggregate demand and consequent low private sector investment, and that the short and long term effects of this are egregious.

This does not mean we should avoid any cuts, or that we should not admit fault for things like PFIs. What we should not do is yield ground on the profligacy narrative, or on our economics. The facts will, sadly, rise to meet us, or so we must believe if we are sincere. We must be in favour of responsible spending, and targetted projects, industrial policy and so on, and we must take measures to deal with private debt levels, which will not magically vanish if we cut government spending, save by the magic of liquidation.

In any case, some of what the coalition is doing is well worth supporting in principle if not in practice. We could reduce the resources directed towards our justice system by a variety of measures over the long term, not least measures targetted towards social mobility and rehabilitation. Off our own backs we would do well to offset energy costs via insulation and green tech, and so engaging in training and payment of ‘relatively’ low skilled labour, as well as aiding the path-dependent development of industry in key areas. Deciding where and how society allocates resources is an entirely worthwhile project, provided we don’t aim to allow a massive simultaneous deleveraging of the UK economy.

for an alternative economic approach that puts full employment before cuts look at
http://bilbo.economicoutlook.net/blog/?p=17681.
Modern monetary theory could provide an alternative approach and does deserve closer study and discussion. Bill Mitchell and other proponents of MMT are writing extensively on this but as yet it seems to be completely ignored in the UK.
I went to the Fabian conference yesterday called The Economic Alternative but there was little economics and not much of an alternative.
I agree with your analysis, frustrating isn’t it?

3. Leon Wolfeson

@1 – …The amount needed for the justice system is going to rise sharply.

Moreover, “green” technology costs a vast amount of money, compared to building nuclear reactors (which is even primarily a capital cost, rather than a ongoing tax on energy bills)

@2 – There’s ZERO alternative I can see coming out of Labour.

4. christhegoth

Oh dear gods…

This isn’t rocket science. Labour still oppose the cuts. We have simply admitted we are stuck with them as Osborne crushed the growth we left him when we left office.

Which means any future Labour Govt would have to get growth going to get some extra money coming in BEFORE they then start promising to fix up Sure Start or Disability Services. The extra money coming in will come from the extra jobs created by more growth happening. Less will be paid out in benefits, and more will be paid in taxes.

There’s no point in lying. That really will sink us.

All this talk about how to deal with Labour’s economic competence issue is missing the point. Labour are economically incompetent.

They gave us the biggest deficit in the western world.

They now turn around and are complaining that the Tories are cutting too far and too fast and at the same time that Labour would be left with a deficit to clean up.

Well, if there is a deficit in 2015 then it is part of Labour’s deficit from 2010 and it will be because Osborne is not cutting far or fast enough. If he was cutting too far and fast then there would be no deficit.

The reality is that our economy is being hit by the Eurozone problems and Ed Miliband refuses to rule out joining the Euro.

Both Eds avoid talking about the single biggest threat to our economy – an implosion in the Eurozone causing a global recession and a second banking crisis. When it comes (and it is looking very likely) then Labour will not be able to capitalise on the subject because they make no mention of it now.

What Labour should be doing is calling for more global coordination to save the global economy from recession. The first step of that is to say that the Euro is a failed project and the a Labour government would not sign us up to it. The next is to push the Eurozone countries towards a solution to their problems.

The problem with that is that it would damage Ed’s chances of a nice well paid retirement on the continent.

What they should be doing is calling for early intervention to save the banks from running out of money and requiring another huge bailout. Instead they are telling us that we should be weakening the banks by taxing them more and reducing their capital.

Economic competence means reducing the borrowing as fast as we can without unemployment going up too fast, strengthening the banks, and demanding that Europe sort itself out. That would lead to the strongest economy in 2015, not Labour’s policy of borrowing more, blaming the banks and sucking up the European project.

Aye, I was at the conference too. I don’t dislike a lot of what the leadership is trying to do, I simply think there’s too much tinkering around the edges, and they are too vague and equivocal on the central issues.

The language is all wrong, and very few of Labour’s spokespeople seem able to get it across. This has been true for a long time. When they finally came out with the line around the time of the Labour conference that: “Lehmans in America didn’t fail because Gordon Brown spent money on schools” I was divided between being pleased they’d hit on a note that with some modification could work, and the fact it took them a year and a half to do it.

Since then things haven’t gotten any better.

Ed Balls’s address focused a lot on Keynes and that was enjoyable in the moment, but the policy is unclear at best, and the line to the public is confused. They don’t lack lack credibility simply because it’s harder to talk about fallacies of composition than it is to say: You can’t solve a debt crisis with more debt, they lack credibility because they never have a clear answer to any given question until people have stopped asking it.

The reality is that private debt is far more worrying than public debt right now. Thanks for the link by the way Keith! I’m enjoying it.

Oh and for the record @3, I’m fully in favour of nuclear power. I was simply being brief, and there was no intention of implying anything so specific as what the composition of our energy infrastructure should be in the short to medium term.

8. christhegoth

@5 Nonny Mouse.

I’m glad you’re not the Chancellor. It’s not just about cutting. It’s about SAFELY cutting, and stimulating growth as well.

If The Torys cut enough to close the deficit, what with the bog-all growth they’ve given us, The Disabled will be left dying in the street due to a lack of Public Services. And there would be mass unemployment as the needed Public Sector workers are sacked by the 1000 with no jobs to go to ( due to the lack of growth ).

I assume you don’t approve of that kind of thing.

The one area where I agree with nonny is that Europe may overshadow everything, and is another reason the public are reluctant to look to any economic alternative. Better the devil you know, as long as the government hasn’t completely tanked the economy, the fears surrounding the eurozone will incline them to stay firmly put.

Cutting government spending massively at a time when households are extremely constrained in their spending would mean reducing private sector orders, firing public sector workers, reducing the spending ability of all those so-affected, thus leading to defaults on mortgages and credit cards, lowered spending on goods and services, more companies going bust, more unemployment and so on until the massive level of private debt was worked out of the system.

All of which collapses tax revenues and increases unemployment benefit and welfare costs. It also produces path dependent problems, lack of work experience, defaults and poor credit histories, and so on. It also shrinks GDP, making the debt to GDP ratio higher unless debt goes down drastically, which is hard to do without tax revenues.

That’s one possibility. The others are a lost decade of muddling through, and increased wage growth and inflation.

10. Leon Wolfeson

@4 – So, at some undefined future point when all the damage is undone, Labour might consider simply pumping cash in again.

Rather than changing how things are done to make real difference to people. No, we have to follow the same old blueprint, and it’s too bad about the NHS splintering, the Universities failing and the poor and disabled dying off.

That’s the TORY line!

@5 – Really? Wait, nope. Your facts are wrong, as usual.

America is over 100% GDP, and in absolute terms has a far larger debt. The UK is at 63%.

“If he was cutting too far and fast then there would be no deficit.”

What rot. You cannot kill growth AND the deficit unless you shut down society as a whole. Osborne has chosen to kill growth.

“an implosion in the Eurozone causing a global recession and a second banking crisis.”

It’s the third or fourth biggest threat to GDP (behind the coalition’s policies, Scottish independence and the probably result of that – a massive uptick of violence in NI . Moreover, Osborne’s austerity has caused a massive amount of brittleness in the system which was entirely unnecessary.

Moreover, there is no realistic alternative to exposure to the Eurozone, without tanking the economy anyway. And no, killing the Euro and tanking the EU market anyway and hence killing OUR economy isn’t a smart move unless you’re a 1%er.

Our unemployment is rising 500% faster than the EU. The cuts are, by your standard, FAR too fast. (the Tory pork-barrel spending is a problem as well, of course).

Will a 25% drop from where we *should* be by the end of this Parliament do you? Because that’s what we’re looking at. Because the Tories have managed not only to kill off the perfectly normal recovery but to cause another recession.

11. Leon Wolfeson

@7 – The problem there is that I see calls for very expensive energy all the time from the left. Nuclear power costs are known – Uranium isn’t going to change in price much any time soon, and Thorium is far more abundant.

The costs are primarily capital, and as I said THOSE can be managed if they power the nation! (Actually build for peak time and establish a hydrogen economy using off-peak power to generate it…)

12. christhegoth

@10: Wolfeson.

We’re not in power. Bar campaigning for these people and hoping The Govt will listen there is nothing we can do.

If The Govt ignore us then The Disabled are screwed. Reality.

13. Leon Wolfeson

@12 – And hence a recovery plan needs to be made. Show people what will need to be done. Come up with new ideas. But don’t throw people away, say that it’s too bad and they’re screwed.

14. christhegoth

@13: Wolfeson.

Actually, I think we should be saying that it’s too bad and that people are screwed.

The electorate has to learn that you can’t safely vote Tory. And this will be quite the lesson. Labour can give viable alternatives sure, but ultimately we are powerless at present. Even in the Lords it’s luck at the mo’.

There are not enough Labour MP’s. As the Public did not vote Labour enough. So this Tory Govt are wrecking the place and harming the vulnerable. That is the message we need to tell people.

As well as listening to, and campaigning for, the vulnerable to try and get this Govt to listen obviously.

15. Chaise Guevara

Why does this all have to be framed in terms of the next election? Can’t Labour say which current cuts they oppose, agree that the situation will change in the next three years, and come out with an actual mission plan six to twelve months before the election?

MMT analysis would suggest that we should not be cutting the deficits at the current time. Private companies are hoarding cash, the banks are not lending and private households are slowly paying back debt. If the public sector also cuts back we will undoubtedly end up in a deflationary cycle.
Our public debt levels are not out of control, we need to encourage growth. Austerity is self-defeating, the S&P analysis on the Eurozone anyone?
I am not an economist but MMT seems a logical analysis to me and its ideas are gaining traction. We need to be looking at alternative economic theories, the current ones obviously do not work or give an adequate answer to our current situation.
Does anyone else have a view on the merits of MMT?

17. Anon E Mouse

What is really annoying is when Alistair Darling stated the obvious about government waste before the election the Labour smear machine moved in on him – he described it as “Hell Unleashed”.

The unelected Gordon Brown in action with his thuggish friends against his own side.

Then we had Ed Balls trying to convince the public that it was right not to cut waste in government and so we now have a situation where this government is spending MORE than Labour did and the public actually believe they are on an austerity program.

It was the same with Thatcher claiming to be cutting public spending when the opposite was true.

The sooner Labour get a grip and stop treating the public like fools the sooner a credible alternative to this government may be on offer and all the cosy chatting between supporters will not be good enough.

Ed Miliband is the elephant in the room and the sooner this unrepresentative weirdo is kicked into touch the better…

18. Leon Wolfeson

@17 – Of course we have austerity.

THIS IS WHAT AUSTERITY CAUSES.
You’ve been told and told and told.

You didn’t listen. Stop whining.

19. Leon Wolfeson

@14 – And it can’t safely vote Labour either, given the policy adopted is identical in that reasoning.

Six of one, half-dozen of the other. There are no alternatives being proposed, no deviation from the Tory’s view of the situation being presented. “A little slower” is no longer good enough or credible.

A refusal to take risks of any kind with policy means that it’ll be impossible for Labour to win. Fighting for fringe Tory votes when the left-wing voters who stayed at home in the last election have – by themselves – sufficient voting weight to carry the election for Labour…

…well, it’s Labour’s choice. Time for a new party on the left.

I can accept what Balls is saying – namely that Labour cannot yet promise to find the cash to reverse Conservative cuts in 2015 until it sees the state of the mess inherited from Osborne.

But what I cannot then accept is why Labour can still promise to find the cash to continue with Conservative plans for a £32 billion train set, equivalent to £51 million that could be better spent reversing some of these cuts in each and every parliamentary constituency in the UK. Is HS2 really the top priority for a Labour Government, ahead of everything else collapsing before our eyes?

21. Anon E Mouse

@18 – Leon Wolfeson

It is a fact the government are spending MORE – you are being conned Wolfster.

This government loves people like you who actually believe the propaganda they keep putting out.

Well done…

@17 – borrowing and cutting are not mutually exclusive. If you cut spending but revenue falls you can end up borrowing more. Likewise, in a less strict sense, you can spend less on non-welfare items and end up spending more on job seeker’s allowance, public pension provision, etc, because of the consequences of the cuts on private incomes. That’s excluding the multiplier, whereby the effects on demand have an impact on economic activity in the present, and expectations of the future which guide investment.

Private investment is greatly reduced if companies expect constrained demand for what they make in the future. Similarly, they tend to shorten hours and eventually fire people if they are facing an income squeeze.

Finally, even if you do not face extra costs or reduced revenues, of the rate of interest on existing or new debt increases the cost of that can raise borrowing despite cuts. In our case however, as we issue our own currency and have a strong highly developed economy, we are in little danger of high interest rates. Indeed, they are exceptionally low because money has fled from areas of perceived risk– which right now is everywhere.

Whatever else might be true, we can always pay our debts. They might be devalued if we inflate, but we can always pay them. Consequently we are far safer than some alternatives. In fact not only do countries like the US, UK, Japan etc manage to maintain low rates despite spirally debt problems, we’ve seen negative real rates at times– investors effectively paying governments to hold money. The UK has incredibly low rates because investment has halted elsewhere.

Given that unemployment is across the board, and not merely structural, the choice is, in real terms, one of people with skills filling each others needs in exchange for economic remuneration, vs idle human resources. The effects of such idleness are not temporary, either, there is a significant degree of hysteresis involved, whereby situations created today will shape contexts later on, all rationality is bounded, all behaviour contextual, children growing up with unemployed parents for example face a large number of disadvantages not purely related to money. These effects create generational, geographic and economic problems which endure and cease to be susceptible to incremental public policy shifts, requiring significant investments of time and money.

By and large I’ve tried to avoid the human suffering argument, but it’s high on most people’s list.

23. christhegoth

@19: Wolfeson

Of course it can vote Labour. We created growth, and won the economic argument of the last 2 years.

A protest vote to either The Greens or the English Democrats is also possible.

The Lib Dems should be punished for such a shocking betrayal.

And obviously the Torys are grossly incompetent, and infested with psychopaths.

Valuable lessons for the Public to learn. It’s just a shame so many of my crowd ( The Disabled ) will end up injured first.

They point to the fact that despite sounding like they’re against all cuts in the media, Labour’s ratings on economic credibility haven’t gotten better.

I think this must be a typo Sunny. It’s because they sound like they’re against all cuts that Labour’s ratings on economic credibility haven’t got better. That’s exactly the problem that Balls is trying to remedy.

One way to cough-up to past errors is to admit how Tory-lite they were and highlight the way that the current government is pushing harder down the same path that got us in this mess.

I don’t think the public generally are aware of the mess that is PFI or certainly the cost of these projects. Yes, there was a need for investment, building etc after the last Tory government and the public were generally behind the idea new hospitals, new schools etc. However, practically all the relative few who have followed the PFI scandal over the last 10 years or so are gobsmacked as to the total cost of these projects.

There’s two parties at fault here. (New) Labour can cough-up to their part and it’s a big thing to cough-up to, considering the astronomical figures we’re talking about and its impact on the economy and future economy. However, at the same time, Labour can also high-light the other party involved: the exploitative private sector.

The private sector is still continually being wheeled-out by the Right as the saviour who is going to put everything right but the reality is that, given every opportunity, it exploits everything and anyone. We’ve seen it in privatisation of utilities, the railways and we see it in PFI deals (which rarely make the mainstream papers).

Labour need to be reiterating this point: they made some massive mistakes when it came to money but it’s important to see where this money went. What the Coalition are saying is the sickness (how New Labour wasted the money) is also their cure (they want to spend the money in the same way).

It’s a chance to admit to past mistakes and try and draw a line under them; a chance to position themselves to the Left again; and demonstrate that the so-called ‘competent’ Coalition want to open the doors and bring in even more of the private sector mistakes (that helped get us in the mess).

Labour needs to turn this around point out they’ll learn from the mistakes of the past – that’s if they will and aren’t some Tory-lite party – and really force home that their mistakes will be repeated continuously by the Tories. Turn some of that media anger and indignation that the Tories have stoked back round on the Tories themselves.

26. gastro george

As Sunny points out – if you feed the deficit/cuts monster, then it only asks for more.

Balls didn’t actually say that much. But the main problem was that he chose to say it (feeding the monster). Wintour at the Guardian (is he mounting a one person bring back the Blairites campaign?) then spun it as a concession – which the media circus then leaps upon.

Ed didn’t say very much (and the same happened). Except he also tried to spin a separation between Blair/Brown and the present through different states of the economy – and that didn’t really work and only confused the issue more.

Labour needs a consistent theme/narrative – and that should be growth and jobs. There are open goals here. Ireland is just announcing it’s fifth austerity budget. Manufacturing and the trade balance are still worsening. What is the Tories alternative? Using an EU veto to protect the City. Acclaiming a victory from the possibility of opening a Chinese currency exchange in the City. Where is the re-balancing there?

This is how I see it:

In 2010, it made perfect sense to focus on urging the Tories not to choke off the recovery, and to promote the growth that was essential to reducing the deficit rather than going full steam ahead on tax rises and spending cuts.

In 2011, as the economy faltered, it made perfect sense to urge them that it was not too late to slow the pace of cuts and get the recovery back on track with targeted spending and tax cuts designed to promote growth.

In 2015, this is all going to be ancient history. It *will* be too late, with no prospect of stimulating growth so sustained and so rapid as to make up all the ground lost between 2008 and 2015. We are going to have to fight an election in the context of a lingering deficit, a higher-than-expected national debt, and a national income that’s significantly lower than we expected it to be even 6 months ago. Growth may well still be sluggish and unemployment still high. Borrowing may well be more expensive. Many obvious tax loopholes will have already been closed and many taxes already raised. We are just not going to be able to pledge to spend an extra £80bn a year (or more) to reverse the Tories’ cuts. How could we plausibly claim we were going to fund that spending? So we are going to have no option but to fight that election on policies that don’t involve large spending commitments, like the Living Wage, responsible capitalism etc.

So the only real question is when we start to shift our focus. And the ‘pivot point’ surely has to be the policy review that’s going on right now: either we can unveil a set of policies that are premised on the idea that we can undo the effects of seven years of recession and stagnation immediately upon taking office and get spending back to pre-crash levels, or we can unveil a set of policies premised on the idea that by the time we take office, much of the damage that has been done to the economy will be irreversible (in the short to medium term) – meaning our focus has to be on issues (responsible capitalism, the Living Wage etc.) that don’t involve huge spending commitments.

Let’s face it: it took the last Labour government a decade to get spending up to those levels in the first place, and that was in the context of sustained growth, a healthy world economy, etc. We can’t plausibly go into the next election claiming we can climb that same mountain again in half the time, in less favourable conditions, and without unsustainable borrowing.

28. Alisdair Cameron

@25, Oliver.

One way to cough-up to past errors is to admit how Tory-lite they were and highlight the way that the current government is pushing harder down the same path that got us in this mess.

Glad someone gets it. In a nutshell.

One more point:

At the time of the last election we were facing around 10% of lost growth: very roughly, the economy had shrunk by 5% during a period when it ought to have grown by 5%.

It was plausible then to argue that much of that ground could be made up, in time, simply by taking action to stimulate growth. For instance, if we’d managed to get the economy growing 1% above trend for the first two years of recovery, and then 0.5% above trend for a further six years, we would have ended up with GDP only 5% lower than it ought to have been by that stage – leaving a fairly modest structural deficit remaining to be closed through discretionary spending cuts and tax rises.

But at the time of the *next* election in 2015, we could very well be facing 15% of lost growth – the 10% lost in 08-09, plus a futher 5% lost during a subsequent five years in which growth was, on average, 1% below trend. And it strains credulity to think we could make up all or most of that lost ground by stimulating growth. So the position we’ve been taking – stimulate growth now and many of these cuts won’t be needed – is not one we can just stick to indefinitely. The ‘now’ matters. It was true when we said it in 2010, but it won’t be true if we’re still saying it in 2015.

The error to own up to is not that the level of public expenditure or the deficit at the time was excessive or out of control, it was not, but to admit that consumer and private debt had expanded far to rapidly. The banks should have been regulated, the expansion of credit restricted and the property bubble should have been addressed. Admit that the Libdems were right at that time but the Tories were not.
The situation now is completely different. Any reduction in deficit expenditure will lead to a deepening recession, all the economic evidence supports this. Arguing how deep or how fast the deficit should be cut is just playing into the Tories’ hands, you cannot cut the deficit until there is some growth in the economy. If you do it will only make matters worse. The only way that Osborne’s strategy will work is if the private sector takes on more debt, this assumption is written into their budget forecasts. That will not happen.
We need a growth strategy based on jobs, training, housing and green energy. We need to stimulate the economy through investment and give a positive message that the state can resolve the mess that the private sector has created.

31. Leon Wolfeson

@21 – No, I’m not being “conned”, you’re *delusional*. Pork barrel spending does not equal spending on the social infrastructure.

@23 – If you can vote Labour, then you’re not convincing me you’re on the left. (Or you’re simply naive). No, there needs to be a new party for the left – and no, the anti-Science greens and regional SNP do not count.

Indeed, if you can CONSIDER a vote for the ED’s, you’re on the right. Further, you’re unpleasant.

@27 – And? That ISN’T a reason to accept the Tories are right. That opposition is pointless. That nothing can be done outside the Tory’s frame. That writing off millions is the correct thing to do.

You’ve swallowed the Tory’s setting hook, line and sinker. You cannot even *conceive*, as a Labourite, of a, ANY, different way of doing things. Well, fine – but you’re not to the left, and it’s time the Left had their own party. Because Labour is not what we’re looking for. Clearly.

@27. G.O.
“In 2015, this is all going to be ancient history. It *will* be too late…”

About 10 years or so ago, I came to the gut-churning conclusion that the Tories always get the society that they want, even when they are not in office. Everyone always accuses the Tories of short-termism; whether it’s the smash and grab privatisations or the perception that they can’t join-up the dots and understand the consequences of ‘off the cuff’ policies. Whilst there’s a lot of truth in this, the long term game (intentional or not) is always in their favour.

Even in a single term parliament it’s possible to inflict more damage than is possible to put right in 2, 3, 4 or even 5 follow-up terms. The Tories understand this, even if it’s on an instinctive level. For all the fauxrage over ‘there’s no money left’ – which makes you wonder what the fuck the Tories and LibDems on the Treasury Select Committe were doing for all those years – the truth is that the Tories never really leave enough money in the pot to repair what they’ve just done. If they get rid of something, they know Labour will never be left with enough to get it back. All Labour can do is tidy-up as best they can with a bit of supposedly centre-left window dressing.

However, tidying-up is not enough anymore. Labour hinder themselves because they’re too busy playing by Tory rules and too busy trying to pander to Tory voters.

If we’re not going to see a country shaped by Tory policy *forever*, no matter who is in government at any given time, we need serious and drastic change and we need more than either Balls or Miliband are offering now.

Oliver,

One way to cough-up to past errors is to admit how Tory-lite they were and highlight the way that the current government is pushing harder down the same path that got us in this mess.

If you mean spending more than they are bringing in, and not working hard enough to reduce the dangers caused by household debt, then you’re probably right. But if you mean that the previous government was following the same policies as the present one, then I think you’ll look stupid. People can clearly see a change (even if a lot of it is more show than reality), and you get nowhere assuming the electorate are stupid.

And on PFI:

There’s two parties at fault here. (New) Labour can cough-up to their part and it’s a big thing to cough-up to, considering the astronomical figures we’re talking about and its impact on the economy and future economy. However, at the same time, Labour can also high-light the other party involved: the exploitative private sector.

The private sector is still continually being wheeled-out by the Right as the saviour who is going to put everything right but the reality is that, given every opportunity, it exploits everything and anyone. We’ve seen it in privatisation of utilities, the railways and we see it in PFI deals (which rarely make the mainstream papers).

Most right-wing thinkers dislike PFI as it shifted the risk from the companies to the government, and was anyway biased towards a small number of contractors. It is a good example of crony capitalism, rather than free markets in action, which reward those close to government. Whilst both right and left seem to have those who like this (I won’t say defend it, as I’ve never seen a defence) it is not really fundamental to either side of the political divide’s philosophy.

If you have competition and free entry to a market, it will be efficient. If you just chose private sector companies to take tax moneys to build a public project then that is not efficient, nor sensible – it seems to rather obviously combine the worst of both sectors. But if you are serious about opposing this sort of thing, then you need to attack the right target, which is not the right-wing bogeyman, but those who manage and promote such realtionships between companies and state, who can be found on right, left, middle and probably above and below as well.

34. gastro george

“If you have competition and free entry to a market, it will be efficient.”

That is such a big statement. I could object to it on many levels. But it does contain a grain of truth. For example any large IT infrastructure project. If you design it to ladle money to a privileged supplier who uses proprietary software and keeps the technical knowledge to themselves, then you are doomed (pace most recent government investments in this area). If you break the project up into smaller parts, use open standards, have an open purchasing scheme from multiple providers and keep technical knowledge in-house, then it can be successful.

But this is no right-wing nirvana. It is using government maintaining it’s power and position and using the market to get the optimal outcome.

Labour is in a similar position. They’ve outsourced their theory of government and economics to a set of shysters.

Well, for the time being, Labour activists can clearly say we wouldn’t be talking about spending millions on a new Royal Yacht while the rest of us get the “noble austerity” line!

gasto george,

But this is no right-wing nirvana. It is using government maintaining it’s power and position and using the market to get the optimal outcome.

Labour is in a similar position. They’ve outsourced their theory of government and economics to a set of shysters.

I am not sure there is a right-wing nirvana. Bizarely, if the market works well enough, we end up with communism instead…

But Labour have a problem at the moment, of being caught between activists and realisty (the one the Conservatives had for 12 of the last 15 years…).

37. gastro george

Watchman – if your “reality” is that described by the neo-liberal consensus, it’s the problem not the solution. They got us where we are today.

38. Leon Wolfeson

@37 – Indeed, and now Labour’s committed itself to the NeoLiberal bottom line…the Left need a new party.

@ Leon (31)

“And? That ISN’T a reason to accept the Tories are right.”

I don’t accept that. I think they’re desperately wrong.

“That opposition is pointless. That nothing can be done outside the Tory’s frame. That writing off millions is the correct thing to do.”

I don’t acept that either – though I’ll admit I’m sceptical that opposition is capable of doing much more than taking the roughest edges off the Tory programme. (It’s not going to stop them pushing through the bulk of their cuts.)

“You’ve swallowed the Tory’s setting hook, line and sinker. You cannot even *conceive*, as a Labourite, of a, ANY, different way of doing things”

I can. I can conceive of rejecting the Tories’ scaremongering over the size of the national debt and aiming to eliminate the deficit on a longer, more realistic timescale, achieving as much as possible though growth and progressive taxation (including tackling tax avoidance and evasion) rather than spending cuts. I can also conceive that the best way to make savings is to reduce the costs of high unemployment, not to cut spending on essential services. I can even conceive that there might be ways to bring down the government’s bill for e.g. housing benefit and tax credits by requiring landlords to charge a fair rent and employers to pay a fair wage, rather than just by making people poorer.

As far as I’m concerned, I am just taking the left-wing position seriously: the Tories are doing real, lasting damage to the economy and are going to leave us poorer, more indebted, growing more slowly, and still running a large deficit.

Think what that means. Even after the Tories have raised taxes by £20bn-ish and cut spending by £80bn-ish, the amount of tax revenue we’ll be raising every year is going to be tens of billions of pounds short of what’s needed even to fund *that* level of spending – and more than £100bn short of what would be needed to reverse the cuts. That’s not a Tory “frame” or “setting”, that’s just the miserable result of their failed policies.

40. Leon Wolfeson

@39 – So basically, as I said, you’re accepting their framing of the issue rather than looking for alternatives. Britain has not mysteriously lost 10%+ of it’s working age population.

But we WILL lose major industry if this kind of linear thinking goes on. Shell, today. Tomorrow, probably BP.

@ 40 Leon

“So basically, as I said, you’re accepting their framing of the issue”

How is it the Tories’ framing to look at things in terms of our ability to fund public services through taxation? Isn’t that just the general frame in which the left/right debate over whether growth should fund tax cuts or increased spending takes place?

“Britain has not mysteriously lost 10%+ of it’s working age population.”

A fair point, and I wish you’d expand on it. Is the idea here that the economy has far more spare capacity that anyone is acknowledging, and as such could (even in 2015, even in the context of higher debt and a lingering deficit etc.) fairly quickly make up all the ground lost from 2008 to 2015 if we pursued the right policies? I’d love to be convinced of this, but the idea that we could (sustainably) grow the economy by the 6% a year or so that would be needed to make up that lost ground and thereby fund a reversal of the cuts… it just seems too much like a the left-wing mirror image of the Tory dogma/wishful thinking that says you can reduce a deficit by 2.5% of GDP a year without damaging growth.

42. Always Integrity

To do the right thing in the future we have to be honest about what went wrong in the past – and we have to not just be honest amongst ourselves but also with the electorate. Too much debate here is designed to obfuscate / position / spin and not enough to face the past and learn for the future.

Yes, the origins of the Crash were not overspending in the UK and yes the start of the problem was in bundled derivatives based on huge numbers of mortgages which were let, at the urging of the Clinton Administration to the US banks to many many people who could not really afford them.

However, there was a failure over here as well as over there in regulating the banks and in allowing private borrowing to spiral to historically huge levels. The truth is that there was competition, in the form of lighter and lighter regulation so as to attract more and more financially related turnover – and that that competition based on low regulation started here in the UK in the late 90’s – other countries, including the Us responded by also lowering regulation.

Yes the Conservatives supported the UK levels of expenditure and the light regulation but they were not the Government, Labour was and being in government means that you are responsible, not the opposition.

The crash, when it came, was international and not just in the UK. The last government responded correctly by saving most of the failing banking institutions and injecting borrowed cash into the economy. The US did the same.
The issue then became what to do next and this is a matter of timing and judgment. Neither party at the last election was straight and truthful with the electorate. The Conservatives choose to start reducing expenditure quickly and to attempt to get borrowing (in terms of the annual deficit) down over four rather than five years as proposed by Labour. Labour said / says too far too fast.

To continue borrowing at a high rate, as they have done in the US, is one approach and may be the right one but it depends on someone being willing to lend to you and at a rate you can afford to repay. If you borrow much more you end up borrowing to repay existing and new loans at a higher interest rate rather than spending that money propping up demand. Could we have emulated the US? Possibly but at great risk. The US is different, it is huge, all commodities are traded in dollars and the US overall tax take is lower than the 50% UK figure, giving bond holders more confidence that in extremis taxes can be increased further to reduce the debt. If the UK had, or did, attempt to borrow more it is quite likely we would end up where other countries such as Italy have ended up.

Almost all economists, including Ed Balls and Gordon Brown, agree that taxing at higher than about 40% of GDP reduces growth in the medium to long term. Currently we are at around 50% and it is difficult to see how this can practically be increased (the 50% includes avoidance and evasion – to reduce that, and the government seems to me to be trying hard, will simply get further ahead of that 40% long term limit).

This is the truth. Wishing it were not does not help. In this context being seen to resist each and every cut is damaging as is trying to shift the issue to 2015 and beginning to weave a story where it is the Conservatives fault is disingenuous.

Yes, spending more now is in line with a ‘managed Keynsian approach’ – the problem is that Keynes also said that you had to save up in the good times so as to over spend in the bad. The truth is we did not save in the good times and may not be able to borrow much more now. The electorate deserve the truth and anyone who wants to be in government in the future has to be honest as to the past and clear as to the future. It is immoral spin to think otherwise.

43. Leon Wolfeson

@42 – “This is the truth.”

No, it’s the TORY truth. It excludes doing anything different, like introducing rent caps. Like SOLVING problems. It’s the 1%’s kick to the 99%’s nuts.

And Labour have dutifully signed on the dotted line to say that millions of people in this country don’t matter and are scroungers to be thrown away.

We’re a nice third-world state now.

44. Always Integrity

43. Leon Wolfeson

Hi Leon, I am a ‘floating voter’ – exactly the sort of voter you need to win over if you are to win in 2015.

Rather than being angry and making tribal assertions you need to tell me which part of my analysis is wrong – the issues you raise may well be true but they don’t address the truth I set out.

45. Leon Wolfeson

@44 – The party I support currently is “none of the above”. I hope for a left-wing party to step forward. If you vote for the big three, you’re saying the 1% matter more than you. That’s all there is to it, now.

Moreover, you’re *not* who need to be won over, if Labour had a clue. There are MILLIONS of ex-voters who once voted for Labour, and would again if they were on the left, even remotely.

But they won’t. So – time for a new party.

Always Integrity: Much of what you say is basically correct, but the interest rate points are not particularly valid. You could go through the historical data on this as regards Japan, the US, and so on, but a key point is that the UK has completely missed its borrowing targets, and has record low interest rates despite that.

The theory behind this has been gone into already many times, and probably doesn’t need to be re-hashed. Krugman seems to have made a hobby out of going over it with different variations, and does so well.

On the point about tax, that’s an assertion you might want to back with evidence regarding growth correlated with marginal tax rates at various levels. The problem with the argument is that growth is not particularly closely tethered, casually, to taxation. Improvements in productivity, technology, labour laws, etc, or supply shocks and natural disasters, or indeed demand shocks such as this one, are all significant. The internet, for example, or plastics, or computerisation, were not limited to low tax states. Nor was industrialisation, agricultural advances, etc. We shouldn’t simplify ‘growth’ to a vague and unspecified goal. After all, GDP growth isn’t always good.

The Us spends three times as much per person on health care, and has worse outcomes. It has five times as many people per hundred in prison. Growth is good, especially if you want to pay down debt, as we do, but not all growth is identical.

The UK has a lot of problems. Very high private debt, low private investment, etc. One thing you can be sure of is that we will move beyond this. The conventional routes are: Lost decade, deflationary depression, and increased government spending, monetisation of debt and diminishing value of existing stocks of debt.

The UK probably can’t support a lost decade in the Japan sense, it is in a very different position.

Leon:

A new party under this electoral system will achieve one thing: To split the vote. That’s if it achieves anything at all.

To support Labour is not to support everything Labour does, not now, not ten years ago, not in 1950. Parties don’t work like that, they aren’t cults.

I’m not ideological by nature, I don’t care for any one specific grouping, nor for a coherent or consistent worldview or ideal concept of society. I do believe that the debate over how Labour responds is a fight worth having.

48. Leon Wolfeson

@47 – Oh yes, GETTING PEOPLE WHO WILL NOT VOTE FOR LABOUR TO THE POLLS IS SPLITTING THE VOTE.

I make no apologies for shouting, because what you just said IS narrow-minded. (The word “tribalism” is useless noise). A center-slightly-right party, as Labour is positioning itself, will not get the millions on the left who stopped voting for them before to come to the polls.

You’re deceiving yourself, and worse attempting to deceive others. You keep right on shadow boxing with the Tories, I’ll try and build something without the “neoliberals”, and if you’re still “trying” with the Labour party I’m quite happy to tar you with.that brush now.

49. Anon E Mouse

@48 – Leon Wolfeson

You are losing it fella if you believe there is any appetite in this country for a party that offers anything remotely socialist.

When given a choice the whole world has rejected that hated system of governance for a reason.

Remind me again why you support ID cards and state control and not liberalism.

Perhaps you and “Sally” should start your own political party because the likes of you two with your minority views do not represent the feelings of Labour Party supporters.

You are doing the coalition’s job for it….

Leon, I wish you’d say a bit more about the sort of alternative approaches you have in mind. What would your ‘new party of the Left’ pledge to do on reversing the cuts in 2015, and how? You’ve mentioned rent caps more than once, which is fine – but isn’t that an example of a policy that’s designed, rather like the sort of policies Labour are starting to talk about, to address problems *without* spending more money?

If Always Integrity is right that the tax burden is presently around 50% of GDP – I can’t find the figures to confirm that – then reversing £80bn of spending cuts would mean increasing that to 55%. If that’s what you’re advocating, fine, but I wish you’d make that case (or the case for some other approach) rather than just telling everyone they’re refusing to consider alternatives. Tell me what some of the alternatives are and I *will* consider them!

I’m also curious as to how you square the circle of despising Labour as rabid right-wingers, while maintaining that the first moral duty of any left-winger is to return to Labour levels of spending on public services and benefits and restore any Labour programmes cut by the Coalition. There seems to be a general tendency in some sections of the Left to insist that the last Labour government never did anything for ordinary people, while also insisting that the Coalition will harm ordinary people if they undo or water down Labour initiatives like EMA, Sure Start, Building Schools for the Future, Tax Credits, the Minimum Wage etc., or cut spending on public services from Labour levels. Again, surely you can’t have it both ways?

Leon, also worth pointing out that there are already dozens of altermative left-wing parties out there, the largest being the Greens, the SWP and Respect. What has each and every one of them got wrong, ideologically and in terms of winning popular support, that a new party would be able to get right?

@49 Can you remind me what the bad points of ID cards were again? The only thing I remember about them was that they’d been handled badly and would cost a bit to implement.

53. Anon E Mouse

52 – Cylux

What are the bad points of state control by idiots over peoples lives from the cradle to the grave?

Er the fact that the last incompetent Labour government couldn’t keep anything secret if their lives depended on it – do you not remember them putting personal data on CD’s and then losing them?

The state can “edit” things on the ID Card to suit their case – hey without ID Cards they lied and smeared a government weapons inspector called David Kelly – imagine what they could have done with them.

Fraud – despite the last Labour government’s “Open Borders” policy we cannot keep our borders safe now and imagine how much more this country could be ripped off with fraudulent ID Cards.

The costs – the last useless Labour government claimed it would cost £5 billion but others said between £10 and £20 billion – either way the public is forced to pay for something they don’t want.

If you voted Labour it became voting for Socialists and eventually National Socialists it seems had this crazy scheme had been implemented.

Despite idiots like Labour’s front bench there never was an appetite for socialism in this country – still isn’t. The reason Labour did so well under Blair was because they specifically didn’t behave like socialists and ID cards and state control are just part of that.

Hey look at Italy with a leader no one elected – just imagine if that country could allow or deny services based on an ID Card – it’s a step towards totalitarianism and it stinks.

If this coalition government can achieve one thing I hope it’s to remove idiot politician’s power over our lives and stop people being dependent on state handouts.

Would you trust someone like Ed Miliband with your personal details? I wouldn’t….


Reactions: Twitter, blogs
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