The Progress annual conference 2013 session on earning the public’s trust on the economy was lively and chock-a-block with ideas. The panelists, John Eatwell, Margaret Hodge, Nick Pearce, Ann Pettifor and Jonathan Portes, brought a wide range of perspectives to the discussion, but were united in the view that the coalition has lost the argument on austerity. However, this has not led to a surge in confidence in Labour as an alternative, nor has the failure of austerity led to increased support for centre-left parties elsewhere.
In re-establishing the public’s trust in our economic competence Labour faces a number of big challenges. First of all, the historical evidence suggests that incumbency itself plays a key role in establishing economic credibility. Although in the run-up to the 1997 election John Major had long lost the public’s trust on the economy, New Labour still pledged to maintain the Tory government’s spending plans for the first two years. This is not an isolated example of an opposition acquiring trust by aping the outgoing government’s policies; even Franklin D Roosevelt promised a more conservative economic strategy than Herbert Hoover’s in the lead-up to the 1932 election.
This would suggest that best course of action would be not to focus on macroeconomic issues but to present policies that appeal to common sense, such as establishing a British Investment Bank, building houses, developing infrastructure, a job guarantee, clamping down on tax avoidance, and reforming public services to cut waste and put the citizen at the heart of the process.
The second major challenge relates to how we communicate the success of the Brown government in averting a financial meltdown while also acknowledging our mistakes. Members of the panel felt that we should not apologise for spending levels, especially since the rise in the deficit followed large drops in tax revenues, not a bout of fiscal profligacy. We do need to apologise for failing to reform financial regulation, and for not closing tax loopholes, both of which are areas on which the Tories are themselves vulnerable.
Third, George Osborne has been able to frame the economic debate entirely on the issue of public debt. We need to broaden the debate to include the much greater levels of private debt in the economy, in particular the massive debts of the banking sector, which was only saved by a £1tn bailout from the state. We need to go on the offensive on reform of the financial sector. Labour needs to convince people that we have a coherent growth strategy that will lead to greater overall welfare. Achieving this will require us to reframe the debate on the economy and explode the myths of ‘kitchen table economics.’ We need to persuade the public that a failure to invest in schools, basic services and infrastructure is the real burden we are leaving for our children.
During the closing session of the conference, Oona King reminded us that Barack Obama won his second term despite being behind on the economy, and so it may indeed be possible to win without winning the argument on economic competence. Even if this were to be the case, an incoming Labour government in 2015 will still have to get it right both in terms of turning the economy around and convincing the public of its competence.
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Tanweer Ali is a member of Progress. He tweets @Tanweer_Ali