Britain entered the financial crash with the second lowest debt-to-GDP ratio in the G7 and cross-party support for the Labour government’s spending plans. An unprecedented fiscal and monetary stimulus – supported by the G20 – helped prevent an economic catastrophe. By March 2010, the Labour government had set out plans to halve the deficit within four years through £20 billion of tax rises and £40 billion of eye watering spending cuts. Debt was due to level off at 75% of GDP by 2014-15 – below the average over a period extending 200 years.
Yet within six weeks of taking office, a Coalition of Conservatives and Liberal Democrats (who went into the election supporting Labour’s plans), egged on by the mainstream media and those same credit rating agencies that caused the crash in the first place, published a Budget setting out plans to cut public spending by over £80 billion.
While it is true that the full extent of economic damage caused by the cuts has yet to be understood, many thought that public fears about the cuts would already be bubbling to the surface. But the two parties in the Coalition still enjoy a majority of support in the UK. Indeed, a recent YouGov poll found that 43% thought the way the Government is cutting spending was ‘good for the economy’ with 40% saying the opposite. Close to two-thirds of the country think that Labour is wholly or partially to blame for the cuts.
How has this been allowed to happen? And what can social democrats do to oppose the cuts?
The Coalition government has been ruthless and relentless in its use of language. For well over a year, the Conservatives have told the public that ‘we’re all in this together’, that the cuts would be ‘tough but fair’, and that they were ‘unavoidable’ because Labour ‘didn’t fix the roof while the sun was shining’. Once in Government, the Liberal Democrats quickly adopted their masters’ language.
Labour’s message, in response, has been confused. Gordon Brown spent the summer of 2009 denying that any cuts would take place under a Labour government, despite spending plans to the contrary. As Labour’s election coordinator, Douglas Alexander, has recently admitted, that approach ‘didn’t resonate economically or emotionally with the experience of families and households across the country and it gave spurious credence to the charge of denial, with which our opponents to this day seek to damage us.’ A pre-election spending review would have forced the other parties to have agreed with Labour’s proposals or set out what they would have done differently.
And while the Labour leadership election this summer provoked a fierce debate about whether the deficit should be halved over four or more years, only one candidate (Andy Burnham) was willing to discuss where they thought cuts should come from. The result has been an easy dismissal by the Coalition of Labour’s opposition to spending cuts on the grounds that it doesn’t have its own plan.
Against this backdrop, responding to the Coalition is not easy. But to win back credibility and attack the ‘necessity’ and fairness of the cuts requires three steps.
First, social democrats should start every discussion by pointing out that the Tories supported Labour’s plans until the greed of Wall Street caused the collapse of Lehman’s. Both parties in the Coalition should be asked what plans they had in 2006, 2007 or even 2008 to ‘fix the roof while the sun was shining’. Which spending items did they oppose at the time? What did they do to register that opposition? If they didn’t say anything publicly, why not? Pursuing this line of attack exposes the lie that Labour was to blame for the current predicament. The deficit was, of course, due to rising welfare benefits and falling tax receipts as the recession took hold.
Second, social democrats must bring every debate – whether on welfare reform, departmental cuts, or the external situation in the eurozone – back to unemployment and falling living standards. So far, the recovery is jobless and – if the Chartered Institute of Personnel and Development are to be believed – a further 1.6 million jobs will be lost. Meanwhile, Resolution Foundation has recently shown that real wages are set to fall for the next three years as inflation outstrips pay increases. The Coalition sees the metric of success as the pace of cuts. The left must be clear that success is measured by job creation and rising living standards. Blame must be placed where it belongs: with members of the Coalition who believe, like former Tory Chancellor Norman Lamont, that ‘unemployment is a price worth paying’. All Coalition policies should be challenged for their impact on unemployment and living standards with Labour setting out what it would do in response. A coherent growth strategy including policies devoted to state-financed investment, incentives for innovation, and the enhancement of our workers’ skills is critical.
Third, social democrats must question the fairness of every cut. Where the burdens are felt evenly, for example with procurement spending in defence or pay restraint in the public sector, the Government’s approach should be supported. This will provide license to hammer the Coalition’s attack on the health service, Sure Start, universities, housing benefit, the police, and many other areas. Independent think tanks like the Institute for Fiscal Studies have exposed the regressive nature of the tax and benefit changes. Meanwhile, Howard Reed and Tim Horton have shown that the poorest will be hit fifteen times harder than the richest by the spending cuts. Continuing to carry out this research and disseminating the findings exposes the Coalition’s lies about fairness.
The public debate in the UK over cuts has been poisoned by a combination of disingenuous, but persistent, claims by the Coalition and a cack-handed response by the Labour party. Winning the debate means, first, winning back credibility. Once the public starts listening again, the discretion and unfairness of Osborne’s gamble will become clear.
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Erm, do you ACTUALLY believe Brown averted an economic catastrophe?
The banks ballsed up because Brown insisted on funding his profligacy by way of taxing an asset-price bubble, rather than regulating them. He passively encouraged a ludicrous credit boom whose outcome was predictable. There was also too much M&A activity in the sector, making the retail banks too big.
We subsequently had the worst recession in living memory.
Brown did NOT avert a catastrophe. He caused one.
You suggest Labour would have halved the huge deficit by 2014. This means that the national debt would still be increasing at a vast rate of £50bn pa. For you to suggest that this would be “levelling off” is frankly potty.
"Both parties in the Coalition should be asked what plans they had in 2006, 2007 or even 2008 to ‘fix the roof while the sun was shining’. Which spending items did they oppose at the time? What did they do to register that opposition? If they didn’t say anything publicly, why not? Pursuing this line of attack exposes the lie that Labour was to blame for the current predicament."
I hate to give you strategic advice, but this would be a collosal error. If they're winnning the current narrative trying to rewrite the previous one won't help. All it will suggest is that both of you were wrong, but only one of you has learned lessons. Saying the Conservatives agreed with you previously, and they were right to do so, when they're successfully arguing that they're NOW pursuiung the right strategy, just makes you look wedded to your errors. You need to adapt to the changed landscape, whether you like it, or agree with it, or not.
And the same applies to 'questioning the fairness of every cut'. If you attack every cut proposed, then all it looks like is that you don't really agree with the need to cut at all, or you agree with it, but can't make the tough choices it involves. You'll never look fit for government that way.
I've been in opposition. It's hard and it's crappy, and you don't get to set the terms of engagement. I think you're halfway to identifying the problem. But until you get fully into impotence mode and fully understand the problem you're in, you can't move to the solution. It's not something that can be shortcutted.
Your first point starts you off in the wrong direction. The idea that the recession was caused by something other than government policy is misleading and false. Exposing the Tories and Liberals support for the policies does not detract from the fact that it was a Labour government that left us bare and vulnerable to the financial services. While the perpetual motion machine was racing along throwing out money Labour were more than happy to lord it and declare that there would ‘be no more boom and bust.’ The economic collapse was inevitable. So to somehow pretend that it was an anomaly of economics is nonsense. Brown followed the Tory model, who had followed the Friedman doctrine and we ended up with much of the same with a bit more poison to boot. The ‘deficit reduction’ budget is nothing of the sort. It’s more about reducing living standards and employment rights. Rights that were so blatantly abused by the New Labour Project. In the long term, as Thatcher found to her own detriment, the deficit will eventually grow larger as benefit payments and compensations to industries begin. At the same time taxes will reduce, due to lapse taxation laws and insufficient staff to collect and investigate taxes and tax ‘avoidance’ schemes.
This will, inevitably, lead to a reduction in healthcare provision, education support and training allowances. Which, in turn, will reduce employees skills, undermine professional apprenticeships and aid in the dumbing down of the workforce. The banks will be back at the door and demanding more tax money to bail them out, due to defaults in mortgages and their exposure to debt from CDS’s and CDO’s two lovely financial tools that are yet to come home to roost.
As for Social Democrats, ( a term that seems as meaningless as New Labour) questioning each cut as it comes, seems as irrelevant a task as I can think of. There is no point in questioning which benefit or service is being cut and whether it is necessary. This leads to the wrong perspective. The entire concept of deficit reduction should be the starting and finishing post for the debate. 1)Why do we need to reduce the deficit? 2)Is there an alternative to it? 3)What genuinely does it mean? 4)Should we pull up politicians and commentators when they try to compare a country’s budget to a household budget?
1) We only need to if one believes that real money is being loaned to us by an individual. If, as we know, the monies are promised through funds and bonds then we don’t need to pare down the deficit.
2) In fact, bearing in mind that the money is coming from pension funds and insurance premiums, working from a capitalistic perspective, keeping the deficit increases pension fund pots and reduces Insurance premiums to the majority.
3) It’s a meaningless statement and is being used to push through an agenda based on the greed concept of ‘free market economics. (Yes. I am talking about the same economics that allowed industry to die because it couldn’t get government support, because it’s not allowed. Yet the same support was allowed when it came to the banks. Banks that owe us as much as the deficit and are still not paying back their debt. In truth, the majority of that debt is now ‘ring fenced’ which means that tax payers are the ‘sole beneficiaries’ of it.
4) We should pull them up about it; we should shake them that hard that they faint and crack their necks. A country’s economics aren’t in the remotest like a household and any comparison therein is futile and misleading.
To conclude: Labour run by Miliband, either would have been the same, will not change its position on the economic model it believes in. (Gordon Brown showed us that) They are not an alternative to the Condem-all government. They, like the brothers Miliband are the same. New Labour, because that’s what they are, have no counter argument for they believe in the same economic model. A cut of £40 billion or £80 billion means the same when you have lost your job and home. Not one of them are willing to bite the hand that feeds them, (Corporations and the filthy rich) even though that very same hand will eventually drag them by the collar down the corridor for the ‘long walk.’
Brown sold his soul for the Blairite dream but didn’t realise he wasn’t part of the club and would be left outside in the cold, exposed to the ridicule and lambast of the public and the press. Miliband thinks they’ll let him join, but again he is deluded. Education can only give you knowledge. Schooling is what will give you power and protection.