Ed Balls’ first big speech as shadow chancellor on the economy last week ticked a lot of crucial policy boxes. Emphasising that cuts are ideological, rather than purely practical, calling Osborne out on a stalling economy and arguing for a slower and more balanced approach to deficit reduction are all crucial points that Labour must make. But where we’re behind the Tories is on translating that message into simple, straightforward terms that the man or woman on the street can relate to.
The Conservatives have a simple narrative on the deficit; that government debt is like household debt. Their argument goes something like – 1) the government is in a lot of debt owing to those profligate Labour types; 2) You and your family wouldn’t be irresponsible enough to get into a lot of debt like that; 3) the government must pay back the money it owes as quickly as possible. It’s easy to understand and it’s compelling.
It’s also wrong. government debt doesn’t work like household debt, as any first-year economics student can avow. Not only because our creditors are unlikely to come banging on our doors demanding repayment any time soon, but also because a large number of national governments run on significant levels of borrowing much of the time.
What governments should be doing is borrowing when times are tight and using the money to invest in future growth, and then paying down the deficit when the economic situation is more favourable. It’s not something Labour always got right in government. The temptation to spend in economic boom times is unavoidable while politicians think in electoral cycles, rather than longer-term gains. But Gordon Brown’s Golden Rule, that the government should borrow only for investment rather than day-to-day spending is something we should make more of.
Instead of allowing the Conservatives to dominate on economic rhetoric, we should instead be arguing that government debt is like a household’s mortgage, rather than its credit card. If used responsibility, mortgages allow families to invest for their futures, giving them a place to live now and an asset once the loan is paid.
By making this case clearly and plainly, it becomes far more obvious that the Tory-led government’s cuts are ideologically-driven. Slashing employment programmes for young people doesn’t make economic sense; it ensures that more young people must resort to claiming state benefits rather than working and paying taxes. Forcing local authorities to cut personal care at home services by cutting budgets has the same effect. By denying individuals support to stay independent in their own homes, the government stores up bills for the NHS later on as falls and accidents at home lead to costly hospitalisations. Cutting vital investment now will lead to serious problems in the future.
Not everyone is going to sit down and work their way through the complete oeuvre of John Maynard Keynes, but everyone is familiar with the concept of investing for their future. When Ed Balls stands up in front of an audience of economic policy wonks, it’s perfectly sensible for him to talk about fiscal multipliers, VAT cuts and OBR forecasts, but what’s missing is a simple, coherent analysis of what needs to be done on the economy. Labour needs to get across to lost voters that our plan for the economy is credible and achievable, so we’ve got to make the case for it in a way that everyone understands.