A new day, a new cut announced and the same failings from the Labour Party to challenge the Tory’s position with a coherent message. There is a very real threat that the economic debate is being lost without ever really being held. The leadership election is becoming a distraction. Labour needs a strong team in place to put the counter-argument to the ideologically-driven austerity of the coalition, and the endless hustings, although helpful in their way, are leaving us behind.
The frustration is that the counter argument does exist and some very serious economists are making it. Nobel Prize winners Joseph Stiglitz and Paul Krugman both have issued stark warnings about the dangers of government contraction at a time of depressed global demand. Excessive retrenchment now, when export markets are weak and local demand low, will force businesses under and push more people out of work. Increased unemployment leads to lower tax revenues and higher benefit and social costs. Stagnant growth means lower corporation tax take and a deficit which, regardless of how hard you cut spending, will never be properly controlled.
I don’t expect everyone to agree with this view. However, it is a valid and serious perspective. It supports the left’s view that governments exist to help in times of trouble. When the economy, here and abroad, is stable and growing, then withdraw the spending. Benefit costs will fall anyway as more people get into work. Some spending can certainly be lost with minimum impact, especially if the private sector is strong enough to take up the labour slack. The deficit and the debt can be managed down as growth increases. It’s a sensible, viable and economically-literate response to small state, free market Thatcherite economics. And it’s a message we need to be delivering now, again and again, in a unified way.
So, Ed Balls, Ed Miliband, David Miliband, Diane Abbott, Andy Burnham, Alan Johnson and anyone else who may crop up on TV and be asked by a Tory / Lib Dem “Well, what would you do?”, or “Well you would be doing exactly the same”, feel free to use this:
“Our approach is different. We agree with the Nobel economists who say growth is the best route to reducing the deficit. Cutting projects like Building Schools for the Future not only harms the children, it harms the private businesses who rely on this work to survive.
Savage cuts now, when there is no demand in the economy and our export markets are depressed, leave private business with nowhere to turn. You are not just cutting public sector waste, you are hitting the private businesses who supply our vital public services.
If these businesses go under, unemployment goes up, which, as Mrs Thatcher discovered, is a very expensive problem to deal with. Higher benefit spending and lower taxes, plus less money for people to spend in the shops.
We want to tackle the deficit – halve it by 2015 – but cutting now in such an excessive way, driven by an ideological desire to hammer the state will kill recovery.
We have a duty to support businesses and people, until the recovery, here and abroad is secure. Then we will see the deficit fall as tax revenues grow and people start to spend.
That is the time to make cuts, and make them in a fair way. Ensure tax rises fall on those most able to pay, unlike VAT. Make the banks pay a sensible amount back to society.
Cutting now risks a prolonged depression and the deficit will never fall. We would offer support now and make cuts later, when the economy is growing again. Yes, those cuts will be tough, but they’ll be against a backdrop of an economy on the up and they can be made in such a way as to protect the poorest in our society.
It’s simply untrue to say there is no choice in this. There is a clear choice – growth, jobs and a sensible plan to reduce the deficit, or ideological cuts which ignore the global economic climate. Yet again, the Tories are making the wrong call.”