Resetting Labour’s policy on the deficit

The Labour movement column

By Anthony Painter

It is very tempting to gloat about the woeful political mess that the Conservatives have found themselves in this week. Hopefully, they will announce all the controversial cuts one by one just so they can be scrutinised in detail and those who are losing out really get know what’s coming. It’s also a good idea to gather together thousands of the most likely opponents in your party and media in a hot convention centre for three days and apply alcohol when you make the announcement.

Then panic and start trying to cover your tracks – by throwing some married couples’ allowance red meat to the circling hyenas. That’s the sort of issue management that I hope we can look forward to over the coming weeks and months.

Underneath all this there is a communication strategy – don’t laugh. What this announcement was about is demonstrating that we are ‘all in this together.’ It was designed to enrage the Daily Mail and Telegraph and the Tory party faithful. The more so the better was the thinking. The coalition has realised that there are limits to the Orwellian approach where whatever you do, no matter how outrageously iniquitous you say it is fair and progressive.

You need a more substantial cover for regressive politics that you describe as progressive.

So when Nick Clegg talks of social mobility while being in a government that will undermine it, he has to have the pupil premium shield. That the pupil premium is just a shift from local authorities to schools that will have a negligible impact doesn’t matter as long as it provides some sort of political cover.

It is the same with these child benefit changes. £11 billion of cuts to welfare rolls were announced in the budget and George Osborne signaled a further £4 billion of cuts during the summer (and it may end up being considerably more.) This child benefit change will cost £1billion. The vast majority of the remaining cuts hit the lowest earners. By provoking a row, the intention was to demonstrate that we are ‘all in this together.’ The problem was that they lost their nerve and now they are juggling a hot political potato. They have forfeited leadership and the doubts will only increase.

George Osborne will be livid today as Number Ten flinched at the ferocity of the reaction. For Osborne, this was but a minor step in a longer and grander journey. His intention is to recast British politics for good. Yes, it is about politics rather than ideology. His analysis is essentially that Labour shifted politics leftwards during its time in office. By creating a client state of benefits and tax credit recipients who use high quality public services, Labour was able to redefine the centreground of British politics in its favour. His mission is to reverse that.

The cut in child benefits and child tax credits is about accepting the short term political cost but then removing support for welfarist policies down the line. Once the universal principle is unstitched then the frontier of the welfare state can be rolled back bit by bit and the number of people benefiting from it reduced. Fewer people receiving state support means less natural support for a party of the left.

But the politics are even more underhand than that even. The critical element of the package is the changes to benefit rules and housing benefit in particular. Making areas of high house prices unaffordable to the least well off forces them to leave their communities. That is tragic. Beyond that, they will head to the poorest areas congregate and ghettoize. In the process Labour’s natural constituency is not just reduced, it is also concentrated. Dame Shirley Porter eat your heart out. Tax cut for middle England in 2013-14 to follow.

Underlying all this is a basic rule of politics: it is governments that redefine the centreground not oppositions. Ed Miliband needs to remember this rule. Capitulation though is most definitely not the right course. However, where Labour is currently positioned neither properly defends social investment nor credibly deals with the deficit.

The most important lines in the new leader’s conference speech were:

“True patriotism is about reducing the debt burden we pass on to our kids.”

“But Mr Cameron, true patriotism is also about building an economy and a society fit for our kids to work and live in.”

That is the key argument that Labour absolutely has to win if it is to win back power in 2015 without simply resorting to triangulation. In order to make that argument it must be heard. To be heard it has to demonstrate that it is serious about the deficit. The ‘risk to recovery’ argument – however right – is not working other than on the pages of the Financial Times and the comment pages of The Guardian.

Labour needs to reset its policy. The starting point for any deficit reduction is now the coalition’s policy – i.e. a £113 billion consolidation of the deficit by 2014-15. Labour’s policy in government is history so forget it. This is part of the process of being an opposition – you are responding to the government’s actual policies rather than some imagined alternative government. It must explain where, how and why it will deviate from this £113 billion consolidation but will also have to go further than Alistair Darling was able to in March.

This new fiscal plan would have three core elements. Firstly there should be cash reserved for ‘frontline services’: police, hospitals, and schools. Secondly, there should be provision made for investing in future growth, economic rebalancing, and jobs: skills, science, green economy, infrastructure and research and development. Thirdly, there should be provision made for welfare reform. This would be in the form of payment for success schemes that give people the support they need to acquire skills, pay for childcare, and help them into employment.

Alongside this fiscal approach, there must be an economic emergency accelerator. If growth dips then this would be a new stimulus.

Such a policy would be credible, specific, and flexible. It would give Labour an answer to the question: what would you not cut? The answer is everything that is not specifically excluded is in the mix unless specific savings can be made elsewhere.

More deeply, Labour must realise that it needs to strike a different and more positive tone on the welfare state than the ‘us and them’ language it falls into too easily. That doesn’t just involve defending the status quo. It means articulating a different and more positive vision of the purpose of welfare. It also means outlining the alternative – American style ghettoes and social breakdown. Unless it’s vividly spelt out, people will not understand the potential nightmare vision within George Osborne’s political gameplan.

An optimistic country fit for the future is the message. Now is the time to give that notion some meaning. Labour is facing an accident prone strategist in George Osborne but a political strategist he is. Oppositions must win the politics. Ed Miliband must be under no illusion about that and the job starts now.