The opprobrium that was heaped upon Labour’s former general secretary, Peter Watt, when he called in May on the party to adopt a little more realism in its response to the coalition’s cuts is a worrying indication of how narrow the space for debate on the party’s economic policy has become.
If it’s not expressed in the language of ‘too far, too fast’ and ‘heartless Tory cuts’, then it is held to be divisive, dangerously rightwing and a betrayal of all that Labour stands for.
I don’t agree with Watt’s view that Labour should simply accept the plans laid out by George Osborne in last year’s spending review. The current performance of the economy indicates that it is struggling to bear the degree of fiscal tightening Osborne is implementing.
Indeed, there’s a danger that by joining Nick Clegg and Vince Cable in swallowing Osborne’s bitter economic pill, the Labour party’s political health – let alone the state of the British economy – could be jeopardised. In the late summer of 1992, Gordon Brown learned just how dangerous it can be to align yourself too closely with a failing government policy when he backed Norman Lamont and John Major’s determination not to devalue the pound’s rate in the European exchange rate mechanism.
But between signing up to the Tories’ spending plans and looking like you’re hanging around on the sidelines willing the chancellor to fail, there has to be another way. Labour hasn’t yet found it.
If the economy dips into a second recession, I wouldn’t recommend that the public’s current killer question ‘so what would you do?’ be answered by ‘we told you so’, for Labour needs to recognise that even if Osborne’s gamble fails to pay off (and the immiseration of the country should be our main concern at that point), large numbers of voters will still hold the previous government responsible. Despite the fact that economic confidence has dropped rapidly over the past year, Labour, notes YouGov’s Peter Kellner on page 10, is still losing the ‘blame game’ to the coalition. The number of people blaming Labour for the cuts has dropped in the last year from 48 per cent to 41 per cent, with 26 per cent holding the coalition responsible and 23 per cent blaming both. The Tories continue to lead Labour by six points as the party most trusted to handle the economy.
Labour can make a start by doing three things. First, talk about the future, not the past: rebalance its focus away simply from what the government is currently doing (or what the previous government did or didn’t do) onto what Labour would do in the future.
Second, demonstrate that that future vision is anchored in a recognition that the public want Labour, in the words of the 1997 manifesto, to be ‘wise spenders, not big spenders’. That, in turn, requires that Labour pick some priorities. At the moment, we risk being for everything and nothing all at the same time. Here the experience of Bill Clinton during the epic battles with the Republican Congress over balancing the budget in the winter of 1995-6 holds some lessons. Clinton didn’t promise to defend every government programme. Iinstead he drew his red lines around healthcare, education and the environment and turned the debate into one on his territory – but he had to define his territory first. By doing so, Clinton sealed the Democrats’ reputation for fiscal responsibility and secured his re-election.
Finally, recognise that the debate about the economy is part of a wider one about the role of the state and the market, and that the public’s views here are complex, though not necessarily contradictory. As a poll for Policy Network published last month indicates, voters are concerned about concentrations of corporate power and believe the market is failing to deliver jobs and shared wealth, and yet they also value its liberal, competitive functions and doubt the effectiveness of the state in standing up to vested interests.
Reforming the state and reforming the market are thus intimately interlinked. Only by demonstrating that it can – and will – do the former will Labour be trusted to do the latter.