Support for a Labour Assembly Against Austerity

Please add your name to the following statement:

The Tory-led Coalition’s cuts agenda has caused huge damage to the economy, slowing growth, increasing unemployment and reducing living standards of the majority of people.

Their ruthless attack on public services has also undermined the very fabric of our society and increased poverty and inequality. More and more people are out of work and reliant on foodbanks.

Austerity has even failed in its own aim of lowering the national debt, which has increased as the economy has stagnated. As a result, a number of proponents of austerity, including the IMF, have urged a slow down or rethink of Tory policy.

But despite the failure of these policies, the Coalition is even proposing that austerity be deepened and extended into the next parliament.

We reject austerity as a solution to the economic crisis. Instead of cuts, we support a plan for public investment and jobs that can get the economy growing.

We believe that only a Labour government can deliver this and that by offering a progressive economic alternative to austerity, Labour can best reach out to a broad coalition of voters whose living standards have declined under this the Coalition government. In contrast, sticking to the Tory spending limits in the next Parliament would be a disaster for Labour.

We therefore support the Labour Assembly Against Austerity in October 2013 that will reject cuts, look at the alternatives to austerity that Labour should advance in its next manifesto to stimulate growth, jobs and better living standards, and that will discuss how Labour Party members can be part of the broad based People’s Assembly Against Austerity movement of all opposed to austerity.

Dave Anderson MP, Katy Clark MP, Michael Connarty MP, Jeremy Corbyn MP, John Cryer MP, Paul Farrelly MP, Paul Flynn MP, Kelvin Hopkins MP, Ian Lavery MP, John McDonnell MP, Michael Meacher MP, Grahame Morris MP

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Labour can invest its way to recovery

There are probably some Tories pinning their hopes on economic recovery to save them from a crushing defeat in 2015. And I recently heard LibDem peer Susan Kramer talk about the coming economic boom.

Yet apart from the foolish and the terminally deluded, almost everyone knows that austerity in Britain has been a failure – even the IMF says so. Austerity killed a mild recovery and the economy has stagnated ever since. As a result, the deficit too has stagnated at £120bn a year. It will probably stay there over the next few years, despite the ever-optimistic forecasts from the Office of Budget Responsibility.

Most attention on Ed Balls’ recent Thomson/Reuters speech has focused on the issue of removing eligibility for the winter fuel allowance from better off pensioners. But there was too a pledge to use the Tories 2015/16 spending plans as the starting-point for Labour’s own budgets.

In the same speech, Ed Balls argued that the government needs to adopt a growth strategy and that otherwise the British economy would remain in the mire. He is right of course. But the same must also be true for Labour. It too needs a growth strategy. Yet the speech contained only a commitment to increase infrastructure spending by £10bn over the life of the next Parliament. In economic terms this is a ‘rounding error’, so small as to be completely irrelevant.

To get back to pre-recession growth and prosperity, the British economy would need to grow rapidly by between £250bn and £300bn. It would need to be led by investment, which now accounts for more than the entire decline in output since the recession began. So the idea that there can be an investment-led recovery ‘paid for’ by minor welfare cuts is simply ridiculous.

Instead, while being economically irrelevant the roll-back of the universal principle in welfare payments has major political consequences. Those consequences are an erosion of the principle underlying the welfare state. Ed Miliband used to defend the universal principle, saying that ‘benefits for the poor lead to poor benefits’. Universalism is needed to maintain the political support of the better paid. Without it, they withdraw support.

In addition, it is impossible for Labour to mount a serious criticism of any Tory cuts between now and the election. The retort will simply be that Labour will also implement them.

The undermining of Labour’s long-held position on welfare also has an electoral consequence. Europe is littered with political graves of social democrat former Prime Ministers who implemented austerity. It should hardly need saying given where the Tories are in the polls, but austerity is massively unpopular in Britain. Even against a shambolic Tory party at all-time lows in the polls, Labour is threatening to undermine its own electoral prospects by embracing failed austerity policies.

Across the world global stock and bond markets are in turmoil because investors are uncertain about recovery. Yet during these wild swings the British government was able to borrow at MINUS 0.76% real interest rates. In fact new borrowing isn’t needed at all as the government can command huge resources for investment. But it does demonstrate the fact that large private investors are willing to pay the government to hold their assets. There is no fiscal crisis. There is an economic crisis.

Instead, the alternative to adopting the economic and politics of failed austerity is very clear and rather simple. The decline in investment is the cause of the slump. The incoming Labour government can invest its way to economic recovery. That way, by growing the economy and increasing employment the public sector deficit will take care of itself.

 

Join Next Generation Labour for a discussion on Labour’s economic plans with Peter Hain MP, John Healey MP, Cllr Catherine West, Heather Wakefield and Michael Burke – 6.30pm on Monday 10th June, Grimond Room, Portcullis House.

Means-testing Winter Fuel Allowance is a disastrous shift in policy

Ed Balls’ announcement today that Labour would begin means-testing the Winter Fuel Allowance is a disastrous shift in policy.

During the 2010 leaders debate, Gordon Brown went on the offensive on universal benefits for pensioners, challenging Cameron to commit to keep a raft of support including help with energy bills for the elderly. As a result of his pledge to do so it has been politically impossible for him to touch Winter Fuel payments, despite calls from the Lib Dems and his backbenchers to do so. In today’s speech, Balls cedes all the ground that Brown sured up and in doing so has paved the way for pensioners to see benefits slashed regardless of who wins the next election.

Balls hopes that his speech will appease those who believe fiscal credibility is gained through making ‘tough decisions’ (read: spending cuts) but if he believes that ‘In the Black Labour’ and their Shadow Cabinet supporters will be bought off by a policy that cuts just 0.09% from the deficit then he is very much mistaken.

Cutting Winter Fuel Allowance in the way Balls plans would save just £100 million but the cost of this policy is significant. Much has been made by Cruddas’ policy review of a rather crass interpretation of a ‘contributory principle’, but this cut travels in the completely opposite direction.

For a welfare state to be successful it needs everyone to feel they have a stake in it. If some people feel like they go through life only paying in through taxes and getting nothing out, then support for welfare is eroded and people will resent paying taxes. Support for welfare has declined dramatically in the last 30 years, with those on benefits being demonised as “scroungers”, but if middle and high earners also receive benefits it’s less likely the payments will be stigmatised. People won’t buy into negative stereotypes of benefit recipients as ‘feckless shirkers’ if they’re benefit recipients themselves.

Means-testing benefits, similar to the heavily criticised way the government has tinkered with eligibility for child benefit, is massively inefficient and creates administrative costs that can even run the risk of eclipsing any anticipated savings. The variation in administrative cost between universal and means-tested benefits is clearly demonstrated by the stark contrast between the State Pension and the Pension credit; administration for a new claim for the former costs £91 while the latter costs £351.

Bureaucracy is not the only downside to means-testing, it also creates the real possibility that, in attempting to take benefits away from the richest, some of the most vulnerable slip through the net and fail to get support. Universal benefits are the most effective method to ensure that those who need the state’s help get it. Complicated forms, a lack of awareness of entitlement and people being too proud to claim means that a third of those who are eligible for Pension Credit are currently missing out, with something as vital as keeping the elderly’s house warm at winter we simply cannot take a gamble that the poorest won’t receive their payments. Not only would this be socially irresponsible but it would create a spiralling health bill for pensioners suffering from the impact of cold weather.

Labour should be immensely proud of introducing the Winter Fuel Allowance; it has saved countless lives and made a meaningful difference to the 3.5 million older households living in fuel poverty. Now is no time to turn our back on this benefit or the universal principle more generally. Balls should listen to Miliband when he, quite rightly, said in January “I think that universal benefits, which go across our population, are an important bedrock of our society”. And surely that’s what One Nation is all about.

Join Next Generation Labour for a discussion on Labour’s economic plans with Peter Hain MP, John Healey MP, Cllr Catherine West, Mick Burke and Heather WakeField – 6.30pm on Monday 10th June