Tag Archives: austerity

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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Nick’s Fag Packets & Their Role in Your Future

There’s a reason why Nick Clegg has admitted to his smoking habit. It’s because littered throughout Whitehall are packets of Lambert & Butler with the government’s policies scratched on the back and someone was getting suspicious. Admittedly, they are piling up in the Department for Work and Pensions in particular, but turn a corner and you are just as likely to find them scattered in the Justice Department, the Home Office, the Defence Department and all around Michael Gove’s desk in education.

Let’s take a few examples found recently:

Discovered at the Tory Party Conference: “Cut Child Benefit for rich – ANNOUNCE FAST!!!”

Dropped outside IDS’s front door: “Housing Benefit – Check D. Mail for facts about claimants”

And standing to attention at the Defence Department – “NO PLANES!! Speak to Sarko (nb strikes!!)”

I estimate Nick must be on at least 40 a day, the rate the badly thought-through policies are emerging from this government.

The cut in Child Benefit for richer parents sounds like a sensible idea in a time of austerity. Why should better of people receive money they don’t need? Well, I support the principle of universality because it offers everyone a stake in our welfare state and if it’s eroded, then people begin to question why they should contribute at all. However, aside from this, it’s cheap and easy to administer. If you have kids, you get the support.

The coalition’s first run at changing this wouldn’t even have required a pack of 20 to sketch out, so flimsy and rushed was the announcement. The plan was to cut CB for families where there was single higher rate tax payer in the household. The press leapt on the fact that two earners with salaries below the higher rate threshold, but with a combined income far in excess of a single earner family, would retain the benefit, whereas the other family would lose out. “It’s too complicated to do it any other way”, we were told.

Now in transpires that not only is the new system unfair and frankly, a touch ridiculous, but it’s almost certainly unenforceable. Why? Because usually the woman claims the CB, and this new approach would require her to declare if her partner was a higher rate tax payer. The benefit is not linked to the salary of the higher earner and so HMRC doesn’t know who should get it and who shouldn’t.

Never fear, Nick chained another pack and Danny Alexander (fast becoming the poster boy for promotion above one’s abilities) sketched an idea to write to everyone to ask them if the partner earns higher rate. Poor Danny, more at home among the spruces of the Cairngorms, forgot that a) people lie, b) it’s virtually impossible to force people to ask their partners to disclose information and c) people’s incomes change over time.

The only effective way to administer this is through a wholesale change in the way income tax is calculated for couples, which would undoubtedly cost much more than the cut will save. It also rather begs the question why, if you are effectively means testing the benefit anyway, you don’t take the opportunity to iron out the mad inconsistencies in the policy as it was originally devised.

So, by all means debate universality and what we can and can’t afford, but perhaps Nick can do us all a favour and take up smoking Havanas, which would at least give his bumbling colleagues a little more space to plan their announcements before they are made.

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