ElectionSOS: Scrap Osborne Spending cuts

By all current polls, Labour is set to win the next election. The Tories are divided, its weak coalition of support from 2010 is breaking up, and some Tory strategists have accepted that it will be very difficult to build an electoral majority with present trends, as Jon Trickett wrote last year. Labour must not coast to victory suggesting it will challenge a conservative austerity agenda and then, once in power, continue to deliver it.

The situation it needs to address is one of unprecedented attacks on the poorest in society, which George Osborne wishes to impose on an incoming government in 2015. With Labour yet to outline an economic narrative that rejects spending cuts, Osborne knows he has some chance Labour will continue them if it can win in 2015.

But surely then Labour, as with sister parties in France, Greece and Ireland, will rapidly – and rightly – lose support. It is welcome that the movement against austerity is growing, with protests against the bedroom tax coming on top of recent hospital protests.

The alternative is that Labour must not only challenge Osborne’s austerity agenda in opposition in order to win, it must do so in government as well. It must inspire and deliver for those who are being marginalised. Labour must be ready with an economic alternative that delivers growth and cuts poverty.

And there are increasing signs that Labour thinkers are getting to grips with this.

Polly Toynbee says acceptance or rejection of Osborne’s spending envelope will ‘define Labour’, writing,

‘Ahead lies the one decision that will define Labour: despite attacking most cuts, will the party bind itself to the government’s iron fiscal envelope, with a bit of fairer sharing within it? If it means to strike out more boldly, the time is growing short for winning the difficult case for borrowing enough to kickstart the economy.’

Peter Hain MP, in The Guardian, wrote on the need to reject Osborne’s spending cuts trap,

‘Some, sadly including anonymous Labour frontbenchers, suggest that the only way for Labour to win back the economic trust lost in the global banking crisis is to sign up to the Tory-Lib Dem post-2015 election spending plans due to be announced in the budget. In fact the reverse is true. More cuts and austerity will continue Britain’s economic inertia and destroy Labour’s claims to offer a serious alternative to the scorched-earth economics being pursued in Britain and across Europe. The coalition has managed to turn Labour’s road to recovery into the road to ruin – a dismal, reactionary consequence of failed policies that Labour must not think of emulating, even for a few post-2015 years. To do so would destroy trust, not earn it.’

He also made the case for public sector investment as the way to reduce the deficit. While John Healey MP too, on LabourList, backed the idea of borrowing to invest for growth, saying,

‘Investment in more homes or infrastructure requires more capital spending and – yes – more borrowing, including by government. Borrowing is good, if it’s for investment to improve longer-term productive capacity as well as create jobs, generate tax revenue and revive growth in the short term. Interest rates on public debt are historically low, so now is just the right time for government – national and local – to borrow to invest. More borrowing by government is now the right thing to do, not the wrong thing; part of the solution not the problem.’

We must now campaign to marginalise the idea that Labour would deliver the coalition’s spending plans in 2015.In January, David Miliband told the Commons, ‘I am happy to debate priorities within that envelope. I will take the envelope that they have set’.

Labour must reject such thinking. To debate spending options without challenging Osborne’s austerity masterplan is like rearranging deckchairs on the Titanic.

The lessons for Labour from elections across Europe are clear. The party must reject Osborne’s spending plans while in opposition and in planning for government, and make preparation for a major investment programme once in power to ensure to put an end to the economic slump.

We have already seen the obliteration of Greece’s traditional socialist party PASOK after imposing poverty on its own supporters. They polled 12.2% in the general election of June 2012, only three years after polling 43.2% to win in October 2009.

In France, we are witnessing the declining support for socialists, as they impose spending cuts, elected as Andrew Rawnsley writes, ‘without a plan’. In a by-election last week, Hollande’s party fell from 2nd to 3rd and dropped from 30% to 21% on first round votes – behind the Front Nationale. And in a parliamentary by-election in Ireland last week, the governing Labour Party fell from 1st to 5th place and from 21% to 4% of the vote as reward for propping up a cuts government.

In the UK, Labour must consider these developments.

We should identify and campaign for three steps; Labour must be prepared to campaign to win with a commitment to

  • reject Osborne’s ‘spending envelope’ and the cuts they impose,
  • begin reversing unpopular cuts and
  • launch an investment programme for growth

Labour must reject austerity at the Autumn Statement

Ahead of next week’s Autumn Statement by George Osborne, the OECD reports today that the Chancellors ‘deep fiscal consolidation continues to drag down growth’ and that ‘unemployment is expected to rise slightly in 2013’.

At the same time the report is supportive of the ongoing austerity policy, specifically backing the increase in the pension age and introduction of universal credit, as measures to get growth moving again.

Labour should seize on the contradictions in the report and not only condemn the austerity policies and punitive attacks on working people.

When it comes to the Autumn Statement next week, Labour should be ready to offer a positive alternative of long-term public investment to create jobs that will lift the economy into growth.

This was outlined at last week’s Alternatives to Austerity: Investment Not Cuts meeting in Parliament.

Shelly Asquith, chairing the meeting, opened it by saying we can’t sit back and wait for the Coalition lose – we need to win with an alternative message that rejects Tory economic plans and mobilises Labour voters.

Katy Clark MP kicked off by saying we need to recognise that Gordon Brown had made the right call by introducing a fiscal stimulus in 2009. It was that policy that meant the Tories entered government with a stable and growing economy, and the impact of austerity meant we should back the same policy again.

She said it was clear that the Tories spending cuts agenda, with the stated aim of cutting the deficit, was a poor mask for their real aim of rolling back the state and public services.

Mick Burke, in his contribution, repeated the point that it is not sufficient to condemn austerity – we need a positive alternative of investment, in housing, health, education. And while welcoming the direction of the Five Point Plan, he said it was ‘woefully inadequate’ in matching up to the scale of the economic crisis.

In terms of getting investment moving, and at a much more ambitious level, he said ‘Now we own banks, we should instruct them to invest’ .

Crucially, Burke highlighted that Osborne was already making plans for an incoming government to make further cuts in 2015-17 – and that Labour should reject them. Justifying this, he said the previous Labour government lost two million votes in 1997-2001, more than in subsequent Parliaments, when it stuck to John Major’s spending plans. George Osborne is laying the same trap.

Steve Turner from Unite urged Labour to reject austerity policies, highlighting Osborne’s trap for an incoming government, and adopt the positive spirit of Labour governments in the 40s, 50s and 60s.

He said the party should consider the real impact on its supporters of the policies it was advocating, and urged them to focus on living standards for ordinary people. In his words, ‘One Nation means nothing if you don’t represent the 99%.

Issues like living wage legislation, developing rent regulation in private housing as well as boosting construction, and taxing bonuses of state banks would all be popular, and would get the economy moving.

The starkest warning however, about the Osborne Trap, was that if an incoming Labour government carried out further austerity on its own supporters, it would risk decimating its own support like its sister party PASOK in Greece.

Now that the Labour Party has opened its policy debate to the public, get online and urge the party to reject austerity.

We will be circulating a model submission shortly.

By Ben Folley

No credibility in a cuts consensus

In the Financial Times, Patrick Diamond makes some wise suggestions for Labour’s next manifesto: we should promise to build (at least) a million affordable homes; we should properly re-nationalise the Royal Bank of Scotland (as some in the Labour Party suggested in 2008), and we should aim to boost the third sector in financial services. In linking all these proposals Patrick clearly understands that what the economy needs is investment.

In programmatic terms Patrick gets a lot correct, so his grand narrative is therefore surprising: “the principal task,” he writes “is to secure the mantle of fiscal credibility”. That could mean whatever one wants it mean but he continues: “this need not entail simply mimicking the government’s cuts. What is required is discipline in managing the public finances”. His phrase “simply mimicking” is worrying. What he appears to suggest would give Labour “fiscal credibility” is not implementing Tory cuts, but implementing Labour cuts, that somehow a political and economic strategy is to accept a consensus that there is problem with levels of public spending.

In Ed Balls’ brilliant speech to Bloomberg during the leadership election he said, in relation to the widespread but perjorative term ‘deficit deniers’ that “some in the Labour Party believe our very credibility as a party depends on hitching ourselves to the consensus view. I am not one of them.”

Patrick Diamond’s premise appears to be that Labour should follow the political priorities of Pasok in Greece, where it saw its principal task as securing the mantle of fiscal credibility by implementing cuts, and has catastrophically declined as a major electoral force. Labour cannot afford to ignore the lessons.

Whether by considering the advice of David Blanchflower, or Paul Krugman, or Joseph Stiglitz or Robert Reich or Victoria Chick, Labour politicians should have decisively reflected such orthodox support for austerity.

Patrick started a sentence that “[Labour's] principal task, as with other parties of the left across Europe, is…”; the answer should have been “a clear rejection of austerity”.