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Balls’ Message Lost in the Noise

Let’s be clear, Ed Balls’ speech to the Fabians on Saturday was categorically not an acceptance of austerity as the solution to the economic mess we are in. So why to so many people, from the horrified Owen Jones to the gleeful Blairites think it was?

Balls’ analysis was classically Keynesian. It was a continuation of the themes he set out at Bloomberg in summer 2010. He knows austerity is wrong and events are proving him correct. I spoke to a technical market analyst on Thursday who assesses trends in the markets and openly admits he has no interest in geopolitical or macroeconomic reasoning for why things happen. He just looks at the facts. And the world is heading for a new, deeper crisis because everyone and everything is “deleveraging”, ie trying to pay off debt, at the same time. Banks, companies, individuals and governments are all sucking money out of the system at once. I suggested therefore that this was a terrible time for governments to be embarking on austerity. He shrugged and said “of course”. The world is grinding to a halt and government austerity, the one thing which could oil the wheels, is in fact making the slowdown much, much worse.

Ed Balls knows this, and what’s more, he said it. He made it very clear in his speech that withdrawing demand now was suicidal. He is in no way suggesting that the Tory approach is right, or that he thinks cuts will boost the economy or cut the deficit.

What he did say, however, is that Labour cannot promise now to reverse the cuts. And he’s saying this from an economic perspective. Come 2015, the damage from austerity will be done. Reversing cuts then won’t help the economy because it would be applying the economic medicine once the patient is dead.

Labour will look for ways to help those hardest hit, but reversing specific spending cuts is basically irrelevant. The new approach will need to be crafted out of whatever mess we are left with in 2015. I agree strongly with many party members that Labour must start now to explain how this new, post-Blair approach to building a fairer country will work. Balls cites a national investment bank and a reevaluation of pay and rewards. It’s a start, but only a start. People are going to be reeling in 2015 and will need a major new vision to rebuild the country. However, this can’t come from taxing the proceeds of growth in the way Blairites seem to think it should.

So while there were gaps in the speech, the basic analysis is not what either camp paint it to be. It’s not a capitulation to ridiculous Tory economic policy and it’s not a return to some mythical Blairite fiscal responsibility (which is both something to copy and apologise for, according to the increasingly incoherent reasoning of some on the right of the party).

How on earth did we get to this point over a practical speech which was tight in its analysis and undramatic in its proposals? Simple. A catastrophic failure of communications. I don’t know anyone who works in the Labour comms team, but I’m sure they are dedicated and hard working. However, somewhere the system is failing so badly it’s come close to splitting the party in two.

Ed Balls was interviewed by the Guardian ahead of the speech and it’s this that caused much of the consternation. This piece does indeed imply that Labour is accepting Tory cuts as the right approach now. It also suggests that we can’t do anything to help people stuck on poor wages suffering from high inflation. Read the speech and the position is much more nuanced. However it doesn’t matter. “Read the speech” I implored people all day on Twitter. “The public won’t” I was told. And those responses are right. The message was already out there and the anger or jubilation was out of the bottle.

So, a sensible and serious speech has managed to create a storm in two ways, neither of which can have been remotely intended. It’s staggering that Labour can fail so badly to manage this message. It doesn’t require “dark arts” or anything so nefarious. It requires clarity, simplicity and a basic grasp of how the media works. You cannot allow there to be the slightest doubt in your message. If you don’t back the current approach, you hammer this home repeatedly. If you are talking about accepting the consequences of cuts (not the cuts themselves), you bloody well say it. Again and again.

People are making huge play of this and it’s turning into a disaster for Labour. And it’s a disaster entirely of our own making. The core message is positive and realistic – austerity is failing and we will need to deal with the consequences. We don’t know how bad the Tories will make it so we don’t know whether we can directly undo the mess.

Labour is hiring executive directors of policy and communications this month. We can only hope that together they will bring some direction, purpose and professionalism to the operation. Ed Balls should be furious that his important analysis has been turned into either a treacherous betrayal of Labour principles or a timely embrace of austerity. And the only people to blame are his own.


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Cuts and the Credibility Gap

It has become fashionable in the Labour Party to take a conservative view of austerity. There have always been voices on the right of the party calling for Labour to match the Tories on deficit reduction in general and spending cuts in particular. These voices seem to echo much louder now as polls continue to show Cameron and Osborne have greater public trust on the economy than Balls and Miliband.

The solution to this crisis of confidence, according to the right, is to ape the coalition on cuts. If they’re seen as more competent than us, goes the exceptionally lightweight thinking, we just need to copy them and people will flock back!

The catastrophic nature of this mistake will haunt the party through this Parliament and beyond. First, we need to clarify cause and effect. While the Tories poll much better on the economy, they don’t poll very well on the specifics of their approach. Sixty percent of people believe the cuts programme should be scaled back if growth continues to stall. This suggests that while voters accept the need for responsibility, they don’t agree that cuts alone will provide it.

There is also a collective failure of memory in the Labour Party. We had thirteen years in power, the end of which coincided with the worst global economic crisis since the 1930s. Why would we expect people to run back to us so soon after a crushing electoral defeat? To be polling in the forties now seems incredible. Compare this to the Tories in 1998 where they struggled to break 31%. Of course our economic competence is being questioned, but this has less to do with our current approach and much more to do with historical blame.

Our response will define Ed Miliband’s leadership and the short-term future of the party. Recent pronouncements from figures like Liam Byrne and Jim Murphy suggest we have opted for a Tory-lite approach to the deficit. Byrne bemoans the high cost of Housing Benefit. He fails utterly to provide a distinctive alternative to cutting it. Housing Benefit goes to private landlords who can charge inflated rents due to a lack of rent control and a devastating lack of supply.

Here’s an issue where Labour can seize the initiative. A massive programme of social housing building would help stimulate a depressed construction market, create private sector jobs, put downward pressure on rents and rein in greedy landlords. As a result, government investment would drive growth, cut welfare spending and improve the lives of people trapped in unaffordable housing with all the social and economic benefits that would bring. It’s a clear message – bold, positive and financially prudent.

Instead, Byrne echoes the Tories and completely ignores the root cause of the cost of Housing Benefit. If voters like the Tory approach they will vote Tory. Labour cannot and must not compete on the same territory, because we will lose.

And here’s the essence of the issue. By fighting the Tories on their territory we are accepting the crux of their argument – Labour is either profligate or it’s useless: the party can only operate in an environment of over-spending. If our response to this is just: ‘No! We can cut too!’ then we are doomed. It’s such an obvious bear trap that Cameron hasn’t even bothered covering it with leaves.

The authors of the Policy Exchange pamphlet “In the Black Labour” make a valuable point. Labour must operate within the parameters of the country’s means. I accept and welcome this. But trust and responsibility will not be delivered by accepting a false Tory premise. Cuts of this scale in this utterly arbitrary, political timeframe (Osborne hoped for giveaways pre-election, remember) are not working. Even the ratings agencies and the IMF are getting twitchy. The US employment position is improving while austerity poster boy Ireland falls back into recession and has an unemployment rate over 14%. And yet we are being told to buy this as a party. Now, of all times.

For Labour to switch noticeably towards the Tory austerity agenda will simply make us look weak and indecisive. If we agree with austerity as “the only way”, then why are we only accepting it now? Why, when austerity is failing around the world, do we choose this moment to change tack? The consequences of this switch go beyond the (perhaps terminal) erosion of our own credibility; they open the door for the Tories to look like the more flexible, responsive party. If we are calling for Plan A, then not only do we look wrong-headed, but we are likely to be wrong-footed when Osborne inevitably softens his approach this year.

None of this is to say we don’t need a credible approach to the economy. Cuts do not need to be the sole defining feature of the strategy. Fiscal responsibility doesn’t come from attacking the £1.6bn of benefit fraud in a cheap tabloid gimmick. In a deficit of over £100bn, this is a drop in the ocean. It’s patronising to suggest that people can only see deficit reduction in terms of cutting. They realise that if you bring in more money, that does the job equally well, if not better.

So Labour needs a big, bold and clear strategy, supported by serious and impactful tactics. The strategy must be to build the economy, create jobs and reequip the nation for the 21st Century. At the same time, we need to re-evaluate our role in the world and also paint a picture of the society we aim to build. Paying unemployment benefit is a waste of money, so get people into jobs. Paying Housing Benefit is a waste of money, so build more houses and cap rents. Housebuilding and job creation go hand in hand.

Our infrastructure is rapidly become unfit for purpose and is making us uncompetitive, so invest (with private partners) in broadband, WiFi and rail. Energy costs are crippling household spending, reducing demand and costing jobs and growth, so invest in renewables, using UK technology and UK companies to overhaul our energy infrastructure, while getting serious about regulating profits in the existing energy companies. This can be driven through a meaningful, well-capitalised green investment bank.

There is a clear case to be made for government spending that delivers measurable returns. The coalition’s policy is tipping money and lives down the drain. It’s bad for the deficit and a disaster for future growth and prosperity. Labour can demonstrate how, far from cutting waste, the Tory approach is increasing it. Increasing benefit claimants, increasing pressures on housing, storing up huge future costs as a generation of young people are cast adrift. Far from being a responsible government, the coalition is wasting billions on pet projects like the NHS reorganisation and the free schools initiative. They are the profligate party, in hoc to the markets and blinkered by bankers.

So Labour must accept fiscally prudent government, but reframe the argument about what constitutes good spending. There’s no need to apologise for spending to improve schools, hospitals and the police. There needs to be recognition that we must be rigorous in its analysis of how money is spent, but a clear case made for spending for growth. It’s dangerous and expensive for a government to retrench now. Billions are being spent every week, but badly, harmfully and wastefully by a government that has lost sight of its purpose – to support and grow the country.

So Labour must not be the party of “soft” cuts with no vision. Governments will always spend. Some of this spending can bring exponential returns. Paying for the social consequences of unemployment, social breakdown and despair is a dreadfully expensive use of people’s money. Labour won’t do this, we will spend to invest, nurture and grow a fairer, better equipped and ultimately more financially stable country. Or so we should be saying.


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The Long-Term Threat from “Govern Now, Think Later” Politics

For a party that’s had thirteen years to plan its next government (or nearer eighty, in the case of the Lib Dems), this Tory-led administration is incredibly short-sighted. It has rushed headlong into a mass of reorganisations and restructurings which look very badly planned and certainly lacking in democratic mandate. Take the School Sports Partnership, a way of allowing schools to co-operate in providing competitive and social sporting activities for their pupils. Scrap it, said Michael Gove, let Heads decide how to run sports. A stream of Tories lined up to praise this new approach – “free the schools!”, they cried in unison. However, people who actually understand school sports made it clear that without properly funded local organisation, school sport was under threat as Heads were forced to prioritise their spending at a time of limited resources. Which to scrap – the sports and games, of those extra computers or even a new teacher? It’s fairly obvious where the axe would fall.

So Gove relents and performs a u-turn which is indicative of this government’s short-sightedness. Hours of discussion about a new approach to school sports and then a hurried about-face. What a waste of time, effort and resources. A little more thought, a bit more planning and this could have been avoided. It’s vital that Labour portray this u-turn for what it is – poor government, hasty management and wasteful ineptitude.

If it was only school sports which suffered from this “govern first, think later” approach, we perhaps could excuse the coalition. They’re new, after all. However, across the board, the Tory government is rushing through decisions without proper consultation and often against the wishes of those impacted most.

In the NHS, a hugely costly reorganisation has the support of only a minority of GPs, who are now being handed £80bn of commissioning budget. The change will cost around £3bn at a time of falling revenue for the Health Service (ignore the “ring-fenced budget” claims – experts say the NHS needs 3% increases p.a. to simply stand still. It’s getting 0.1%). So why do it? The only groups clamouring for an overall like this are the private health companies who are lining up to provide the commissioning services GPs won’t be able to. Report after report has warned of the risks of the dramatic overhaul in the NHS, particularly when money is tight. But Cameron and Andrew Lansley don’t care. They’ve made a decision and evidence be damned. The difference between this and School Sports Partnerships is that while some kids might get fat with the one change, people might die under the other.

Of course the government don’t want people to die, but the stampede to be the most radical minister in an unelected government is leading to rash decisions which will unquestionably have serious effects on people’s lives. There is a lack of evidence that this is at the forefront of any minister’s mind as he or she lines up the next dramatic shake-up of public services.

Finally we come to the big one. The economy. It’s stalling as the effects of Labour’s stimulus packages wear off. Unemployment is rising and the private sector is failing miserably to fill the gap left by public sector lay-offs, precisely as most serious commentators expected. The only jobs being created are part-time, which provide no security to people and often mean families rely on benefits to achieve a living income. Everything is focused on the deficit. The price of Osborne and Cameron’s blinkered obsession with cutting the public sector to somehow restore economic balance is record-breaking youth and women’s unemployment and, perversely, negligible economic growth.

The short-termism is frightening. Even if the Tories manage to eliminate the deficit in an entirely arbitrary four-year period, what will the consequences of their approach be? We will have a generation of young people trapped in unemployment. A lack of stable communities as people are forced to move around hunting for work. Increasing resentment from those who lose out towards those who seem impervious to the deficit-cutting measures. In short, a much worse country to live in.

For anyone searching for an alternative, look to the post-war period. Despite a deficit and debt which puts the current one in the shade, various post-war administrations managed to invest in huge housing and infrastructure projects and of course, the NHS. Boldness brought great rewards. It’s time for further boldness now. Government should be looking to the horizon and to our future, rather than the present. Of course we must increase efficiency wherever possible and provide the absolute best value for money in our public services, but relentless cuts will hollow out the foundations on which they rely. Once lost, local services will never be recovered.

We should be investing in a genuine green investment bank, with the power to raise funds and independently invest in new technology. Instead we have a fund of £1bn, considered entirely useless by all serious commentators. This country has a proud tradition of pioneering innovation, but short-sightedness from the Treasury is standing in the way of a potentially lucrative new industrial sector. If we don’t seize the initiative, others countries will. We need an active and engaged industrial policy which supports industry, encourages businesses to build links with communities through specialist skills and secure employment and sooner rather than later, the Treasury coffers will feel the benefit.

As for our young people, much better to invest in genuine work placements (such as offered by the now-scrapped Future Jobs Fund) than simply hand out benefits then kick people for not finding jobs which don’t exist. When recovery final does come, how does the country benefit from underskilled and unemployed people, out of touch with work? Pay for jobs and training now and reap the benefits in the future.

The thinking required is joined up. Connect each stage of people’s lives to the next. Attacking Sure Start and removing the element of universality will remove the community cohesion these centres currently provide. I have seen first hand how bringing families from across the community together improves the local area as people recognise they have more in common than they imagined. Turn our schools into a market place of special interest groups and the “sharp-elbowed middle class” and watch as these divisions widen further. I would scrap charitable status for private schools, ease the administrative burden on Heads and work towards a truly comprehensive system where every student has a fair chance, not just those in a position to exploit their time and influence.

Support the Educational Maintenance Allowance which keeps pupils in education and allows them the best chance to achieve. Fund universities properly – we will never be the factory of the world, but we could be its R&D department – in culture, academia and humanities as well as engineering and science. Offer proper alternatives to university too. We should support apprenticeships and training schemes which provide paid employment to young people embarking on a career.

And finally, recognise the importance of a life outside work. Community stability, confidence in the next pay packet, a feeling that work and community are not always separate can rebuild society where too often, poorly paid and part-time jobs for multinational companies leave people feeling undervalued. We shouldn’t be demonising those unable to work, but creating an environment where work is available, properly paid and secure. Then we can tackle the tiny minority who are over reliant on the state.

This comes from a recognition that a divided society is an unhappy society. As bankers waltz on, bonuses in hand, ordinary workers are suffering. A paltry, watered-down bank levy does nothing to ease the sense of unfairness that the economic crisis created. The country cannot tolerate further division between the haves and have-nots. We can’t return to the way things were before. Labour gambled on an asset boom and a drip-down from the financial sector. While the revenue this created rescued our public services, the wider picture was ignored. But what this means is more government spending, not less. But this time, we need to spend to invest in the long-term. Only then will we see a rebalanced economy with stable, fulfilling jobs for everyone. This will bring the deficit down as genuine, secure growth returns to our country. It creates a future full of hope for our children, rather than debt and despair and it shows that while innovation is to be rewarded, greed never should be.

This government shows no signs of looking to the future, only a panicky rush to make changes before public will make it impossible. They may be building for their own futures, but for the rest of us, the outlook is bleak.

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Nothing New from Newsnight

I was profoundly disappointed in the way Newsnight choose to manage and chair the Labour leadership hustings last night. Paxman obviously finds it difficult to move away from questioning politicians about their current policies and actions to exploring a wider vision. I wanted to hear more evenly from each of the candidates about how they could reinspire the party and yet Newsnight was obsessed with raking over old ground. Yes, we need to address our failings, and no, we can’t pretend that certain aspects of the previous government’s performance were lacking, but what we need to hear from the candidates is how we move forward. Labour members can decide whether certain candidates made mistakes in government, but the hustings really present the only chance to uncover their vision. Newsnight didn’t move the debate forward at all in that respect.

In fact, the show has prompted me to push for a regional hustings here in the South West. There are currently around 45 hustings during the campaign, but none in the South West. I will be writing to each candidate today to propose they attend at least one event in this region. I have heard many times how Labour seemed to lose touch with Southern England. Well, it isn’t going to win it back b

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