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.