To be credible on the economy, Labour needs a Plan B – not a white flag

26th January, 2012 10:25 am

What steps should Labour take to regain credibility on the economy? The last few weeks have seen intensifying debate on this issue, topped off last week by keynote speeches on the economy by both Ed Miliband and Ed Balls. My own contribution to this debate is set out in a report published by Compass today titled White Flag Labour? – Fiscal policy and economic strategy under the UK’s next progressive government. This article summarises some of the report’s key arguments.

If Labour is to overtake the Tories as the party most trusted by voters on the economy, it’s important to be clear about the reasons why the party lacks credibility at present. The recent In The Black Labour report written by Graeme Cooke, Adam Lent, Anthony Painter and Hopi Sen for Policy Network argues that Labour is losing the economic argument because voters feel the party has “a lack of commitment to addressing the fiscal crisis”. I think this explanation is wrong for two reasons. Firstly, Ed Balls and Ed Miliband were always clear – even before their latest speeches – that the deficit would need to be dealt with by an incoming Labour Government in the next Parliament if (as now seems likely) the Coalition fails to eliminate it by 2015. Secondly, YouGov tracker polling consistently shows that a majority of voters think cuts are necessary; but the same polling also shows that majorities think the cuts are too deep, too fast, unfair and are hurting the economy. This is exactly in line with the Labour message that the Coalition cuts are “too far, too fast.” It would be strange indeed for voters to reject Labour for agreeing with them about the pace and scale of fiscal consolidation.

In my view, Labour’s lack of economic credibility has very little to do with its stance on deficit reduction. Rather, it is a consequence of two factors:

  1. Voters feel that New Labour’s economic policy was a failure. There is in fact much in Labour’s recent record to be proud of, but for now at least, the charge of economic incompetence has stuck, driven in large part by exceptionally well-disciplined Coalition messaging and lack of an effective Labour riposte.
  2. Voters have scant reason to believe a future Labour Government would be any different from the last one, because Labour lacks a detailed and credible economic programme. All it has so far are some good but ill-formed “big ideas” from Ed Miliband (e.g. responsible capitalism) and a few headline-grabbing initiatives (e.g. the five-point plan for growth and jobs), but there is no cohesive economic strategy underpinning the soundbites.

Building a new economic strategy after fifteen years in hock to neo-liberalism is, of course, easier said than done; but Compass has made a start. Last year, Neal Lawson and I drew together a wide selection of economic and social policy experts on the left to contribute to Plan B –  a report which set out out the broad outlines of a programme to deliver a progressive economic transformation in the UK. Plan B‘s proposals include short-run fiscal stimulus to escape economic depression coupled with medium-term reforms to deliver a more robust and accountable financial services sector, increased business investment and innovation, a low carbon economy, greater equalities of income and power, first class and universal public services, a more progressive tax system with lower avoidance and evasion, and a strong safety net to protect the most vulnerable people in our society. As Gregg McClymont and Ben Jackson say in another recent Policy Network report on Labour’s economic strategy,

“if Labour builds economic credibility it can mount an appeal that focuses on economic underperformance and squeezed incomes – and which, by focusing political argument around an activist state, forces the Conservatives away from talking about public spending on to less hospitable political terrain.” 

This is exactly right, and Plan B is a first attempt in this vein. Crucially, Plan B draws a clear dividing line between what Labour’s approach to the economy should be and what the Coalition is currently doing. It also starts with a powerful critique of the damaging effects of George Osborne’s breakneck austerity measures, arguing – as Ed Balls has repeatedly done – that trying to close the UK’s “structural deficit” in just four years – would choke off growth and increase unemployment. This is precisely how things have panned out over the last eighteen months, and Ed Balls should feel vindicated by the accuracy of his predictions.

Unfortunately, the repeated clamours in the media for “fiscal credibility” in the wake of In The Black Labour seem to have spooked the Labour leadership, prompting an unwelcome change of emphasis. Although still blasting the Coalition for economic mismanagement, Ed Balls’s most recent speech on the economy seems to put most of its focus on the need to accept the Coalition’s spending cuts en bloc. This is a counterproductive stance that demoralises activists and campaigners fighting against the many unfair and regressive aspects of the cuts, while legitimising the Tory narrative that “there is no alternative”. While the next Labour Government will certainly face a tough economic environment with few “proceeds of growth” to share around, Balls needs to be crystal clear that there is no reason whatsoever to accept the particular distribution of public spending by department and function – or the overall level of tax and spend in the economy – as immutable constants handed down by George Osborne. An incoming Labour Government should instead commit to a fundamental review of both taxation and public spending, assessing each element of both on the basis of how much it meets several fundamental objectives: promoting employment, reducing inequalities, assisting the transition to a low-carbon economy, and enhancing the potential for sustainable growth.

To summarise: at this point in the electoral cycle, when the true scale of Coalition failure on the economy is becoming all too evident, the Labour Party desperately needs a positive economic alternative that puts equality, environmental stability, jobs and economic renewal centre stage. What it does not need is a meek surrender to the forces of Conservatism. In short – Labour needs a Plan B, not a white flag.

Value our free and unique service?

LabourList has more readers than ever before - but we need your support. Our dedicated coverage of Labour's policies and personalities, internal debates, selections and elections relies on donations from our readers.

If you can support LabourList’s unique and free service then please click here.

To report anything from the comment section, please e-mail moderator@labourlist.org
  • Anonymous

    A clear and pragmatic approach which appears to set out objectives more broadly?

    Like most people, I don’t have a detailed understanding of economics-
    but the explanation given here makes a great deal of sense and getting somewhere;
    opening up many more possibilities rather than down a cul de sac.

    Thankyou, Jo

    • Anonymous

      sadly just now on the news Miliband spoke those famous words, he is worried about the squeezed middle.

      • Anonymous

        Personally Robert I think everyone is affected, other than the priveleged few or really well off- but of course the poorest and least advantaged will suffer disproportionately.I feel so much for those people losing jobs; I don’t think any where near enough emphasis is being placed on this.
        It’s all about number crunching rather than real people’s lives.

        Jo

        • Anonymous

          That is the problem people tend to get most of the political sound bites from the TV if your sick disabled lost your job or working for the min wage and you hear a posh  bloke on TV moaning about the Tories, and then tell you the squeezed middle are struggling, you would ignore him as a New labour party who would have died for the beloved middle class.

  • Anonymous


    To summarise: at this point in the electoral cycle, when the true scale of Coalition failure on the economy is becoming all too evident, the Labour Party desperately needs a positive economic alternative that puts equality, environmental stability, jobs and economic renewal centre stage.

    there is no cohesive economic strategy underpinning the soundbites.

    And this article contributes nothing but more soundbites.

    If you are going to criticise for a lack of policies, then for your criticism to be valid, you MUST suggest some policies.

    Until you do, it’s just more words. Policies take time, thinking and planning.  About 2 years I  would think. And for them to be valid and have any credibility, must be accepted by and endorsed by some credible business people with some experience of employing people.(as opposed to bankers). 

    Labour has virtually no MPs who have any management experience in business. To shape these policies you need to co-opt such people to assist.

    The Lord Myners of this world are not required.

    And a CV like this is NOT ideal

    “….. worked as an economist at the Bank of England and British Embassy in Washington, D.C. between 2000 and 2006.[10] Between 2006 and July 2009, she worked as a business planner and analyst for Halifax Bank of Scotland (now part of Lloyds Banking Group).[11] She was once interviewed for a job at Goldman Sachs but turned it down. ”

    http://en.wikipedia.org/wiki/Rachel_Reeves 

    • Anonymous

      It’s also very easy to sit on the sidelines being cynical, without having much to offer in the way of constructive thinking.

      • Anonymous

        Joanne
        That’s true but:

        I could give an obvious example:
        eg

        No employer NI for first two years of a new apprentice training.

        And it’s not me writing the article.. I would expect anyone writing an article to give some down to earth practical examples of new policies – which might work.

        I AM cynical because most articles on LL are all about spending money. When it comes to job creation – a key item that everyone can agree is needed – apart from direct Government employment – there is a scarcity of ideas.

        And for a Party which talks about the need for new jobs to have no idea where and how they will be created – says more about the paucity of ideas anything else.

        So thanks. But until I see practical politics, I will criticise and be cynical.

        PS:
        And any Party with Ed Balls as Shadow Chancellor has a lot to be cynical about.

        • Anonymous

          OK, thanks for reply madasafish; I just get a little tired with what appears to be an endless stream of counter opinion, perhaps for the sake of it- across the blogisphere; it seems to be the nature of some political blogging.I think constructive criticism and robust debate is fine.(More in general.)

          You’ve explained more here- thanks.
          Agreed great need for strategy on growth and jobs from all parties- not just constant talk of austerity, cuts and little else.

          I’ve just received this, which may be of help, although I’ve been unable to access at present, so not seen:

          http://action.compassonline.org.uk/planbvideo

          Cheers, and always happy to read useful info and shared ideas.

          Jo

          • Anonymous

            Thanks Joanne

          • Anonymous

            OK, no worries, hope video might have been useful.

            Jo

          • Anonymous

            Thanks madasafish- I would like to reply, but for some reason my comments are now not making it through.Maybe some opinions are more welcome than others, I’m not sure.

            Jo

          • No, there is near-zero support in the EU for pooling the revenue from a financial tax. It would remain with the countries in question.

        • Dave Postles

          NI tax break for new (SME) employees/apprentices – bit like the 5-point plan from Balls 😉

    • Anonymous

      That’s what I thought; he hasn’t outlined what he would do, or made any suggestions on how to tackle the deficit.  His piece seems a bit hypocritical.

    • So they have to listen to the same 1% bankers who destroyed the economy?

      Typical Tory trolling.

  • Steve Jennings

    What is needed is common sense, away from the Westminster Bubble most people are confused with labours message.  I asked the question to a member of the shadow cabinet what Tory cuts will you keep and what cuts do you agree with?  The answer was not clear, not sure what cuts to keep, well who knows what mess the tories will leve anyway.  But the answer to what what cuts Labour will implement, gives away why  Labour is not making an impact.  The answer was a mixture of different persentages to the Tories, ie police cuts Labour 12% to the governments 20% and so on.  Ordenary voters will never ever uderstand this technical type off argument, so loved by Brown, Blair and new Labour, especialy  when not in government.  People want labour to be  offering an alternative and hope.  Thats why no one has understood the inept uterances from Mr Balls, this is clearly reflected in the latest polls.  Notthing he said could have made Labours possition less credible.  What is required is less focus groups less special advisers who are not special, or have any experience of what us ordinary folks do to make ends meet.  What is required are real economic policies for all in society and this means giving a clear signal that the rich and priveliged will pay their far share.  Furthermore that capitalism will be regulated for the benifit of all and that provided public sevices work there is nothing wrong with them staying in public hands, with the real possibility that this philosophy will be extended.  This will not be easy with all the capitalist media agaist it but true leaders lead public oppinion, not follow.

  • Steve Jennings

    What is needed is common sense, away from the Westminster Bubble most people are confused with labours message.  I asked the question to a member of the shadow cabinet what Tory cuts will you keep and what cuts do you agree with?  The answer was not clear, not sure what cuts to keep, well who knows what mess the tories will leve anyway.  But the answer to what what cuts Labour will implement, gives away why  Labour is not making an impact.  The answer was a mixture of different persentages to the Tories, ie police cuts Labour 12% to the governments 20% and so on.  Ordenary voters will never ever uderstand this technical type off argument, so loved by Brown, Blair and new Labour, especialy  when not in government.  People want labour to be  offering an alternative and hope.  Thats why no one has understood the inept uterances from Mr Balls, this is clearly reflected in the latest polls.  Notthing he said could have made Labours possition less credible.  What is required is less focus groups less special advisers who are not special, or have any experience of what us ordinary folks do to make ends meet.  What is required are real economic policies for all in society and this means giving a clear signal that the rich and priveliged will pay their far share.  Furthermore that capitalism will be regulated for the benifit of all and that provided public sevices work there is nothing wrong with them staying in public hands, with the real possibility that this philosophy will be extended.  This will not be easy with all the capitalist media agaist it but true leaders lead public oppinion, not follow.

  • Anonymous

    This post seems a bit wishful thinking.  I thought that the writer was going to detail his ideas of how this could be achieved, I fail to see this here.
    Labour’s problem will be the same as the other Parties: What are you going to cut?
    In the last Election the leaders were allowed to be more evasive about the cuts because the public weren’t completely aware of how pernicious it was; consequently, we all too aware of it and want honest, realistic answers.
    I have no idea of what Labour would cut.  As we are noticing with this Government, it is extremely difficult to do and is not popular; this is what Labour should be deliberating.

  • Steve Jennings

    What is needed is common sense, away from the Westminster Bubble most people are confused with labours message.  I asked the question to a member of the shadow cabinet what Tory cuts will you keep and what cuts do you agree with?  The answer was not clear, not sure what cuts to keep, well who knows what mess the tories will leve anyway.  But the answer to what what cuts Labour will implement, gives away why  Labour is not making an impact.  The answer was a mixture of different persentages to the Tories, ie police cuts Labour 12% to the governments 20% and so on.  Ordenary voters will never ever uderstand this technical type off argument, so loved by Brown, Blair and new Labour, especialy  when not in government.  People want labour to be  offering an alternative and hope.  Thats why no one has understood the inept uterances from Mr Balls, this is clearly reflected in the latest polls.  Notthing he said could have made Labours possition less credible.  What is required is less focus groups less special advisers who are not special, or have any experience of what us ordinary folks do to make ends meet.  What is required are real economic policies for all in society and this means giving a clear signal that the rich and priveliged will pay their far share.  Furthermore that capitalism will be regulated for the benifit of all and that provided public sevices work there is nothing wrong with them staying in public hands, with the real possibility that this philosophy will be extended.  This will not be easy with all the capitalist media agaist it but true leaders lead public oppinion, not follow.

  • Anonymous

    (Seem to have gone back into moderation mode- I’m not sure.
    Strange things happening again via disqus.)

    • Anonymous

      No it’s not working press it once and then wait until it says error it will have posted.

  • Steve Jennings

    What is needed is common sense, away from the Westminster Bubble most people are confused with labours message.  I asked the question to a member of the shadow cabinet what Tory cuts will you keep and what cuts do you agree with?  The answer was not clear, not sure what cuts to keep, well who knows what mess the tories will leve anyway.  But the answer to what what cuts Labour will implement, gives away why  Labour is not making an impact.  The answer was a mixture of different persentages to the Tories, ie police cuts Labour 12% to the governments 20% and so on.  Ordenary voters will never ever uderstand this technical type off argument, so loved by Brown, Blair and new Labour, especialy  when not in government.  People want labour to be  offering an alternative and hope.  Thats why no one has understood the inept uterances from Mr Balls, this is clearly reflected in the latest polls.  Notthing he said could have made Labours possition less credible.  What is required is less focus groups less special advisers who are not special, or have any experience of what us ordinary folks do to make ends meet.  What is required are real economic policies for all in society and this means giving a clear signal that the rich and priveliged will pay their far share.  Furthermore that capitalism will be regulated for the benifit of all and that provided public sevices work there is nothing wrong with them staying in public hands, with the real possibility that this philosophy will be extended.  This will not be easy with all the capitalist media agaist it but true leaders lead public oppinion, not follow.

    • Vicky Seddon

      One thing that needs tackling is the refusal to talk about raising money through taxation  – whether to raise taxation rates or tackling the tax evaders.  It seems as if this is forbidden territory, yet is an inevitable part of a progressive package of measures. We need some kind of slogan -something that signals  “everyone contributes” (or we really are all in this together!) as a way of fleshing out what responsible capitalism means.    

  • Dave Postles
    • Anonymous

      Hi Dave, just passing through.

      Would really appreciate if you could stick around on LL
      to add some balance.

      I’m having great difficulty posting comments or getting through
      today.

      Before I start swearing I will be logging off;
      but hope all well with you.

      Jo

  • Jeremy Preece

    Okay. I can see what in broad terms this plan B is trying to
    say. I certainly do not want to knock a coherent set of policies. This is a
    start, and we need to have a top down approach, and cannot simply plough into
    details without a top down view. The result of starting with the detail is that
    you get lost in the percentages etc. and the message is beyond the
    comprehension of most in the party let alone the electorate.

    We certainly do need clear headings that define both what Labour is about and
    what it wants to do, and also to make it instantly distinguishable from the
    coalition.

    I think that the problem is clearly that when the coalition is failing then the
    opposition should have an alternative and not be signing up to wholesale part’s
    of the government’s policy. Dictatorships and political stagnation usually
    stems form an idea that there is no alternative (or a national emergency) and
    therefore no political debate or narrative. This lack of debate began with
    Thatcher and to some extent continued under Labour.

    I know that when I knocked on doors in the local elections back last May I
    did  not hear anyone saying how pleased they were with the Tories or with
    the cuts. Instead they talked of all parties being the same and there being no
    alternative. The only thing to have changed since then is a wider acceptance of
    the incorrect Tory view that it was all Labour’s fault.

    Ed and Ed have hung out the white flag in two respects. firstly by not fighting
    back over the spending in the last parliament – which the Tories promised to
    match, or the fact that the Tories opposed any controls on banks before
    changing to blaming Labour for a lack of control. In other words we allow the
    Tories the myth of economic credibility, which they do not deserve. Secondly,
    having quite clearly shown how cutting too quickly and too deeply chokes
    recovery, in the last few weeks we see back peddling.  So suddenly it
    seems that there really is no difference between Labour and Coalition. Fatal.

    Plan B is a good idea and explains why some cuts are part of a much wider
    package that includes economic stimulus. We need to show why we the Tory plan
    is over simplistic and why it can only kill growth and never heal the deficit.
    We need to show how our plan is in contrast, comprehensive and likely to
    succeed. A tall order? yes, but one that needs work now.
     There is clearly no detail in plan B yet so it is an empty shop window,
    but I think that it is a start. It must now quickly be worked into the first
    level of detail and drilled down. It can work if it is fleshed out into a coherent
    and comprehensible approach.  And if the man in the street can easily
    describe the difference between Labour and the rest.

     

    A change of leader would also help, and one with the drive
    to get the message across.

     
     

  • Anonymous

     Again the key issue is missed!! ( ok not much detail above but still…)   COSTS!!! We can talk about generating extra tax or giving more opportunities etc but one cannot build social justice in a system that doesn’t question the extent of profit maximization.  That is a quintessential neo-liberal dogma!!! A recent article in the Economist on the tiopic of struggling UK retailers cites business rate rises ( tied to inflation) as one of the key factors contributing to the demise of our high streets ( shopping habits being the main one). Yet the analysis fails to even mention the extortionate rents charged to small businesses by landlords, who unlike their clients produce no value to the society, having hidden large part of the income offshore. No one dares to question their power over our economy and livelihoods. When housing is mentioned, only building of new homes/properties is proposed as a solution.  What are we scared off? Is a rent cap such a terrible prospect? Middle England and especially their children know pretty well how high rents are. They are now in the same boat as the working classes and not just in housing but jobs too !! This will not scare them!! Certainly there needs be an open, public debate, initiated by Labour to test the ground for such an idea.  Imagine we turn to someone on £30k + salary and tell them their rent will be 25% of their income and they get to keep their lovely new apartment in a cool, trendy location!! And then to someone on 25, 20 , 15 etc !!!Am I a dreamer?? Maybe BUT I AM NOT THE ONLY ONE !! Who is with me? :))

  • Anonymous

    Surely the most fundamental issue for the economy is that of productivity and efficiency.  

    We are doomed to decline unless we become far more efficient in the production of goods and services.  

    At the fundamental level it all comes down to our ability to  trade and that depends upon our lack of comparative advantage in a whole range of industries.

  • Anonymous

    Red Ed, Blue Labour, Purple Book, In the Black Labour and White Flag. My dream of a Labour victory in 2015 is flying somewhere over a rainbow.

  • Labours problem on The Economy is that half your Members/Voters want to go Left, broadly speaking & the other half Right. The present policy of hopping from one foot to the other pisses off both sides but at least keeps them together, for now.
    You dont have any good choices left, only different sorts of bad.

  • Great, well, fire the entire front bench and run it down then.

    Until then, I’ll keep working for a party of the left. Which isn’t Labour.

    • Anonymous

      which is ? ( i am genuinly interested )

  • Paddy

    One reason Labour’s economic credibility is shot is because the party is partly responsible for the mess we are in. Not all, but partly.
    Another significant reason is because that dolt left the note at the Treasury saying, “Sorry, there’s no money left.”
    We don’t need a think-tank or 300 page report by economists, policy wonks or pollsters to tell us why.
    Oh and what did Milliband do with Byrne? Didn’t he promote him and put him in charge of some fo the refounding Labour stuff?
    Dreadful stuff.

  • Anonymous

    Surely one reason Labour’s economic credibility is shot, is because the party is partly responsible for the mess we are in. Not all, but partly.
    Another significant reason is because that bright-spark left the note at the Treasury saying, “There’s no money left.” 
    Oh and what did Miliband do with Byrne? Didn’t he promote him and put him in charge of some of the Refounding Labour policy stuff?
    So our dear leader promotes a man who told the world we left the cupboard bare.
    Do we really need think-tanks or advice by economists, policy wonks or pollsters to tell us why the public doesn’t take Ed or Labour seriously on the economy?

  • For anyone criticising this post for a lack of detail (inevitable given the length) I would urge you to read the full Plan B report at http://compassonline.org.uk/publications/

x

LabourList Daily Email

Everything Labour. Every weekday morning

Share with your friends










Submit