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Posts Tagged ‘George Osborne’

Ed, show us the alternative

In BBC Question Time, Government Spotlight, Home Affairs, Ideology, Party politics on April 6, 2011 at 7:21 pm

By James Bartholomeusz

Audience responses on the BBC’s Question Time usually range from the mildly interesting to the banal, providing little more than an identification of which panel member the viewer most aligns with. However, once in a while, someone says something so original and yet so obvious that it merits serious consideration. Such a thing was said on last Thursday’s episode: a woman, chosen by David Dimbleby to speak, asked why Labour, if it’s so committed to the alternative, doesn’t pen a Shadow Budget to lay out their alternative deficit reduction plan.

The panelists response to this was painfully predictable. Diane Abbott, as the Labour representative, spluttered something about it being nonsensical four years before an election, whilst Mark Serwotka, the head of the PCS union, repeated his tenuous claim that there is no necessity for any spending cuts whatsoever. And yet this idea of a Shadow Budget, levelled by someone so lowly as to not be a professional economist or politician, is one that, I think, should be adopted by the Labour Party without hesitation.

The current debate on the economy, both national and global, has lined up between the two foremost schools of economic thought: neo-classicalism and Keynesianism. The neo-classicalists, inspired primarily by the 19th Century economist David Ricardo, see budget deficits as dangerous and immoral: according the Ricardian equivalency, any national deficit between income and spending (the UK’s being approximately 10% of GDP) is just taxation deferred for future generations. By radically cutting public spending to balance the deficit (‘expansionary fiscal contraction’, or, in Cameron’s terminology, ”rolling back the boundaries of the state”) neo-classicalists believe that the private sector will be freed from taxation and competition with the public sector to drive the economy back to prosperity. Keynesian thought, meanwhile, led the original response to the financial crisis, bailing out the banks and implementing fiscal stimuli to drive the economy quickly out of the recession. Now out of the immediate danger zone, Keynesians, such as Robert Skidelsky and Joseph Stiglitz, do not dispute the need for eventual deficit reduction, but are concerned that a premature fiscal contraction underestimates how much the private sector relies on the public sector, and so will drop the UK economy back into recession. Instead, Keynesians argue for fiscal policy based on growth and investment to stably harbour the economy, whilst slowly but steadily cutting the deficit.

This is the debate which, since the initial crisis response, has been mapped on to British party politics. Last May, both the Labour manifesto was based on the Keynesian response, whilst the Conservative one was neo-classicalist, and the Lib Dems in between but Keynesian-leaning. At least partially on these grounds, the majority of commentators predicted, before the election, a Lib-Lab coalition in the event of a hung parliament. And a hung parliament we had, except that the Lib Dem high command, vested with the choice of how to form the next British government, elevated David Cameron’s Tories over Gordon Brown’s Labour. Now in government, Clegg and his allies have apparently been won over to the neo-classicalist, and by extension George Osborne’s, fiscal plan: to entirely eliminate the deficit by the end of the parliament through a 73:27 ratio of spending cuts to tax rises.

All the evidence suggests that Osborne’s economic management so far has ranged from lacklustre to abysmal. The Office of Budget Responsibility, set up by the current government, has downgraded its growth forecasts from 3-3.5% to 2.6%. Unemployment is still rising, now at a 17-year high, with one-fifth of all young people unable to find a job. Inflation is at 4%, the highest in 20 years. The Consumer Confidence Index was last measured at -29, the biggest drop since 1994. Even the mainstream centre-Right newspapers, which had previously praised the Chancellor’s conviction, have now turned their attention more to the human costs of deficit reduction than the stability it will ostensibly bring. Osborne’s attempt to blame poor economic performance on heavy snowfall over December fooled no one: the US, German, French and even Spanish economies grew by over 0.5% in the last quarter of 2010, whilst ours shrunk by more than 0.5%. The problem is, what is the alternative?

Ed Miliband’s Labour, having dithered in the autumn months, has now settled on maintaining Alastair Darling’s plan of halving the deficit in a single parliament. With Ed Balls as Shadow Chancellor, this position has now been confirmed. Labour has since busied itself with rebuking the Tory-led government on its choices for deficit reduction: the VAT rise to 20% (predicted to cost families with children £450 extra in 2011), the rise in higher education fees, and front-line cuts to public services have been particular targets of the Shadow Cabinet. But Labour has yet to commit to what it would cut, or which taxes it would rise, were it currently in government. Although exactly how much would have to be cut under Labour’s plan is unclear, Miliband and his colleagues have so far sidestepped the sticky issue of what their ‘alternative’ would actually entail. It is this, more than any other factor, which will cost them electoral support.

I marched, carrying a Labour Party banner, alongside up to half-a-million others in London two weeks ago. And yet, will Labour’s reticence to commit to a specific deficit reduction plan, I am losing faith that there is a credible alternative to the government’s plan, however badly executed. A YouGov poll conducted on the same day found that the majority of the population, 52%, now supports the campaign against public sector spending cuts. But Labour should not fool itself that, just because it happens to be in opposition to an unpopular government, it will automatically gain the support of the electorate. This was the mistake made, in the last two decades, by both Kinnock and Cameron; 1992 resulting in a narrow Tory victory, and 2010 in a hung parliament. Labour should pen a Shadow Budget, laying out exactly which cuts and tax rises it would make. Ed Miliband has rightly sounded the death knell of New Labour and embarked on a holistic policy review, refusing to make manifesto commitments before the cuts have really started to affect the nation. But reconstructing its economic credibility needs to be the party’s top priority, and Miliband cannot afford to be haunted by the ghost of Gordon Brown any longer.

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Two resignations. Two bad decisions?

In Events, Party politics, The Media on February 1, 2011 at 1:10 pm

David Weber

Before I begin, I would like to welcome our newest writer, James Bartholomeusz. I enjoyed reading his analysis of Labour’s past and future, and look forward to future articles.

On the face of it, Ed Miliband’s recent decision to grant the shadow chancellorship to Ed Balls following Alan Johnson’s resignation looks like bad judgement. It is the most potent way he could have gone back on his decision to sideline the Brown treasury team back in September, when he appointed Ed Balls and Yvette Cooper to shadow Home and Foreign portfolios respectively. Not only this, but there would have been a strong logic in offering the shadow Chancellorship to Cooper instead, given that she came first in the shadow cabinet elections and has taken a less vocal line over the economy. Given that Cooper is married to Balls, this would have been a less than meaningful decision, but it might have looked ever so slightly better.

The truth, however, may be more nuanced. We do not know that Miliband had any real choice in who to appoint to the position. Cooper and Balls, sensing weakness and a lack of alternatives, may have threatened to consider their positions if the outcome was not to their liking. Both have a significant number of supporters within the party, and Miliband must be keen to avoid the kind of infighting that characterised Labour’s last spell in opposition. Without knowing the internal politics of the shadow cabinet, which has arguably not been infiltrated by the media to the same extent as the government, or the previous government, it is hard to evaluate Ed Miliband’s judgement.

What it is possible to say is that events are increasingly conspiring against him. Ed Balls repudiates the nuanced and flexible position laid out by Alistair Darling prior to the last election. He stood for the leadership on a platform laying out his opposition to the need to cut spending at all. This article will not speculate whether or not he was right to do so, but merely note that the public disagreement between Johnson and Miliband over tuition fees will pale in comparison should Balls choose to disagree over deficit reduction. An agreed economic policy is essential.

It is all very well for the political freedom of ideas brought by coalition, but I suspect that this is more workable in government, where the need to make tough decisions is at least recognised by the public, than in opposition. And it is perhaps an irony of coalition politics that people may become more accepting of disagreements between parties, rather than inside them. The opposition’s task in the short-term is to bring a simple, well-defined and credible alternative to the table. Only then can it worry about the niceties of pluralism and diversity of opinion.

Incidentally, I do not agree with those who argue that appointing Johnson in the first place was a mistake. There are two lines of argument: one which points to Johnson’s mistakes since being appointed, which is obviously opportunistic, and another which points to his lack of economic experience or qualification prior to being appointed. The latter holds more weight, but fails to credit his experience in government, which is greater than most of the current government, and surely counts for much more than a degree in PPE from Oxford. The argument also has no evidential strength to back it up so far. If George Osborne, who has been criticised too for a lack of economic credentials, single-handedly wrecks the economy before long, it will be strong evidence that Alan Johnson’s appointment was not a good decision. But unless that happens, we will not know whether economic qualifications are needed to take the role of chancellor.

So much for Reddening Ed. What of David Cameron, whose judgement is now called into question with the resignation of Andy Coulson? For many commentators, the ongoing fallout from the News of the World hacking scandal shows David Cameron’s judgement to be highly flawed in allowing Coulson to continue, and actively supporting him, for so long. I will not pass comment one way or another on the case, however. I know too little about it. I will rather look at a tangent that stems from it.

I believe this is further evidence to suggest the tenuous theory that Cameron is a far more relaxed Prime Minister than either of his predecessors. Although Brown’s government was famed for dithering over certain matters; when it came to the continued existence of liabilities, it tended to be more because of the party political context than because of any evidence of the Prime Minister being particularly relaxed. And Blair’s behaviour earlier on in his tenure bordered on paranoid at times, so determined was he not to lose momentum through scandal. A particular example was the first Mandelson resignation, which was back-dated in an attempt to make it look as if he had resigned the previous day, to avoid the opposition taking credit.

Cameron, in contrast, has shown little evidence of paranoia or dithering. He has wisely kept himself further from the forefront of the coalition in the media than Nick Clegg, investing his efforts (as far as one can tell) in its smooth running behind the scenes. This has worked well for his political momentum, as it leaves those out of the know more confused about his political positions, leaving him more room for manoeuvre and minimising accusations of dithering and U-turns. It also avoids the impression that he seeks to control every area of government, which ironically ended up costing Blair so much control.

So both resignations are at present very open to interpretation. Both risk accusations of bad judgement, slow decision-making and lack of control. Yet as we have briefly discussed, there is in reality very little difference to the way previous resignations have played out, other than in spin. Both were of figures who their employers were less than willing to lose; Johnson because of the political significance of his appointment, and Coulson because of the importance of his job. Both Miliband and Cameron may have been wise to play a relaxed game, letting events unfold leisurely rather than spin out of control as a result of frantic behaviour.

True, the wind may be blowing more in Cameron’s favour than Miliband’s; after all, when have more parties been united in government than opposition? When has the collected opposition lacked not just a majority of seats but also of votes? The other conclusion, which I was uncharitably tempted to disguise, is that this is a key lesson in the limits of pluralistic politics, such a key feature of my reasoning in recent articles. Oppositions, as I pointed out earlier, have traditionally had to put up an artificially united front in order to be seen as credible. This is a problem which needs addressing, but which it is difficult to see a solution to.