We bailed out the banks without asking for anything in return – why Labour needs a new approach

By Jeremy Corbyn MP

This article was first published in the Morning Star.

On Monday Peter Mandeslon gave his Prime Ministerial speech to his favourite think tank about future Government spending. Later the same day Kenneth Clarke told the world that spending cuts were on the way with a Tory Government. On Tuesday, Gordon Brown went to the TUC to talk about future spending and reductions to come.

In the year since Lehaman’s went under we have had bank nationalisation, huge sums pumped into the money markets for “liquidity” and apparent determination that this will not happen again.

A couple things are missing from the analysis.

Firstly that the recession we are in did not happen by accident – it is not a freak of weather forecasting but something endemic in an economic system whose motor is essentially the drive for profit, not fulfilling needs.

The acceptance of the market agenda of Thatcher and Reagan has continued long after they have left the stage.

The era of Bank de-regulation, started by that period was continued with unremitting enthusiasm by Blair and Brown who encouraged a money economy and feted every new rich businessman. Remember Adam Applegarth of Northern Rock who made himself very wealthy on the back of de-mutualisation? And there are many others.

Having saved the banking system from collapse with vast sums of public money the second strategy is now in place. To try and return the whole sector back to private enterprise, to the very people who got us into this mess, and expect the majority of people to accept a lower social wage, i.e., spending cuts, in order to pay the huge debt incurred.

Unison are right in their call to defend public spending on the things that really matter to people, health, education, housing, social services, pensions, benefits, transport and demand action.

We need a sea change in thinking and approach by the Labour Government to protect living standards and ensure that in a years time we are not debating the consequences of the massive cuts promised by George Osborne in his first (emergency) budget.

The omens, however, are not good.

Last week the report on MG Rover exposed the dangerously flawed policy of pumping soft loans and grants to any spiv that comes along supposedly to “save” and industry. John Towers and his mates have paid themselves millions in salaries and perks, essentially all from public sources, whilst the Longbridge factory stands idle, skilled workers scrabble for jobs as mini cab drivers or just waste day after day doing nothing. Dozens of other factories have closed and the knock on in the community is huge. It is all very well for Mandeslon to call for an apology from them. How about an explanation of why the EU Commission (of which he was a member at the time) apparently blocked the notion of nationalisation yet approved the huge loans made to the gang who destroyed Longbridge?

Yesterday the Guardian executive pay survey revealed what employees of every large company know, the higher up the pay structure you go the less you have to pay and the greater the perks. It is comforting to know that Sir Moir Lockhead of First Group (whose buses and trains rely completely on public franchises and subsidies) was not forced to ever travel by bus but given £27,500 to run a car and another £5,000 for its fuel.

Instead of lecturing on the need for welfare cuts the emphasis ought to be on collecting more tax from those at the top end and looking at what we need to spend money on to eliminate poverty and improve the life opportunities of all young people.

In a debate with Norman Lamont, (who better to talk of recessions and cuts than the former Chancellor and defender of General Pinochet), Frank Dobson made the very good point that the policy of cuts and raising unemployment actually costs more; every jobless person costs £12,000 per year to do nothing. Maintaining spending in socially necessary public services not only saves jobs but boosts the entire economy.

There are areas of public spending where huge savings can be made, and would be beneficial.

We have spent £9 billions on wars in Iraq and Afghanistan and the Ministry of Defence plans to spend much more in coming years. If Trident replacement and the new weapons system goes ahead the cost will be £76 billions (or over £3 billion every year until 2030). The ID cards and their false sense of security but real sense of intrusion would be another area to save money.

The new public spending debate is being conducted on the most ludicrous ground. The business experts on all TV channels and most newspapers work on the assumption that cuts are needed, then quickly home in on the most costly areas of spending, (welfare, health, education) and start proposing where the axe would fall.

Mandelson and now Brown seem to have happily moved into this ground thus we have the next eight months with the front benches of all three parties discussing public spending reductions in areas of huge need. Hardly a strategy likely to encourage Labour supporters to the polls to prevent a Tory Government taking office.

Time for the TC and Labour Party Conferences to assert themselves.