There were two excellent pieces on Labour’s policy towards the budget deficit last week. One appeared on this site, written by an anonymous researcher to a shadow minister and the other by Jonathan Freedland in the Guardian. Both reached different conclusions on where Labour should stand regarding the deficit, and both were somewhat off the mark.

Both agree on the economics. The anonymous researcher wrote ‘… I believe that the broad thrust of what the two Eds are proposing on the economy is right for this moment in time.’ The economics of the government’s policy are wrongheaded, as they are strangling demand, choking off income growth, and thereby increasing the level of public indebtedness. This is not about right versus left, but right versus wrong.

Nevertheless, it is surely right to point out that the public have not bought Labour’s argument that the government is going ‘too far, too fast’. Jonathan Freedland is too optimistic to assume that the politics will follow on automatically from the economics. The metaphor of a nation that has ‘maxed out on its credit card’ is extremely powerful, drawing a simple comparison with the finances of an ordinary household. This has an intuitive appeal to common sense and all the key buzz words (such as austerity, cuts, responsibility) of this debate reinforce the metaphor. Our opponents have defined the debate, which is taking place on their terms, and in their language. It might take a long time indeed for the public to be ready for Keynes.

But the conclusion of the anonymous researcher may lead us into another kind of trap.  By accepting the level and timing of Osborne’s cuts, we risk merely reinforcing the government’s narrative – though this is far from what the writer is proposing. Voters may be presented with a choice between a party that fully embraces fiscal discipline and is prepared to ruthlessly execute its policy, and one that has lately acquiesced. The subtlety of our position would be lost in the process. Our smaller microphone might serve to amplify the Tories’ message. So we are indeed between a rock and a hard place: pressing on regardless with our five-point plan, or accepting the cuts proposed by the government might lead us up separate blind alleys.

There are ways out of this impasse, but we will need to shift the terms of the debate and to reframe the argument in our own language. In terms of policy there are plenty of new ideas that we can draw on: the anonymous researcher is absolutely right in this respect. We are not bound to follow traditional Keynesian demand stimulation policies, but can focus directly on creating jobs; and the Future Jobs Fund provides a precedent that we should be proud of and should continue to advocate. It is a shame that we did not stress this message of a job guarantee much more vigorously in the general election. A universal job guarantee would be less expensive than other stimulation strategies, and would greatly reduce the costs of unemployment. Moreover, there are strong arguments for expanding the scope of quantitative easing beyond simply expanding bank deposits with the Bank of England. There is growing evidence that QE has not worked as well as had been hoped. Indeed people like Adam Posen of the Monetary Policy Committee have already started the debate on the proper role for the Bank in economic stimulus. So we need not define our goals in terms of higher deficits, but we should not present this as an acceptance of the level and timing of the government’s cuts. In order to prevent our opponents from ridiculing our ideas, we have to shift the terms of the debate onto our own ground, focusing on both policy and language. This will be hard in opposition, and we will need to make the most of the government’s failures and difficulties. The challenge we face is to reframe the debate towards jobs, incomes and investment.

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Tanweer Ali is a member of Progress

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