Labour’s challenge is to exhibit the behaviours of fiscal conservatism

On fiscal policy and party reform, Labour has made two big moves in the last week. If I was being curmudgeonly, which I’ve no intention of being, then I might ask ‘what took you’? A sustainable fiscal policy and party reforms that begin to open the party up are not poll turners by themselves. They are important changes that address the party’s standing over a period of time. They are structural changes – and important ones.

So for any long-standing advocate of party reform or fiscal responsibility, or both, the last week has been the best one for Labour since the election. There is nothing profligate about borrowing to fund capital investment including housing, infrastructure, transport and energy. In fact, any sensible fiscal conservative would be comfortable with that as long as it was investment that genuinely raised the economy’s baseline. It is a point made in the latest ‘In the Black Labour’ paper (actually, re-reading it, it is a point we made continuously).

Ed Balls’s recent interventions on fiscal policy, including the 50p tax rate, have been perfectly compatible with a fiscally sustainable path. HM Treasury’s laughable attempt to discredit it this week (neutral civil service?) by failing to capture the growth impact of borrowing to invest, was incredibly see-through. The only disappointing thing from Labour’s perspective is that it chose to try to pick away at Liberal Democrat tensions rather than making a bold case for why its programme would reduce debt and increase national wealth.

Labour’s challenge – and this is where the proximity of the election matters – is to exhibit the behaviours of fiscal conservatism. It is not enough to make the odd speech. It must be relentless reinforcement of a fiscally responsible message. This won’t have hordes marching on the streets to sweep Labour to power. But it it should staunch the slow but continuous bleeding of support that would accompany weak economic credibility. It is also an honest description of what the next Labour government will be like – tough with narrow room for fiscal manoeuvre when it comes to current spending.

Wriggle room will ultimately come from using state resources in a smarter fashion. There may be some scope for moving some investment in ‘human capital’ – university degrees, job programmes and skills – into the ‘capital’ column of public accounts. Services need to be brought together where they can have most impact – at a more local level. Ring-fences will have to be reviewed – if you are going to ring-fence the NHS, schools, the police, international development and pensions, there’s not a lot left. New sources of revenue will need to be considered and linked very specifically to deficit reduction or supporting particular services.

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Economic competence is vital for Labour in 2015. The proposed party reforms are vital for the party over the next decade or two. The absolute key to the Collins package of measures is to formalise the voting rights of individual trade union affiliates (and ensure that the party regulates access to them fairly) and registered supporters in the leadership election. Mark Ferguson is right to point out that this simply offers the promise of a mass party rather than achieving it per se. However, the party will always be held back if it is seen as controlled by the trade unions or, alternatively, wealthy donors. Together, the Collins reforms constitute an opening out of the party. They will enable the party to build a formidable democratic network if it so chooses. In time, this will begin to open out its policy making and local selections as well. In other words, we are only at the beginning. As one of the vocal supporters of closed primaries for some time, it really is a tremendous moment.

Politically, this turns what has been a weakness for the Labour leader and the party itself – its perceived proximity to just a few trade union leaders – into a strength. It can demand that the Tories and the Liberal Democrats support campaign finance reform with an individual cap. It can promise to do it itself within two years of taking office. This will further emphasise a Conservative weakness; they are in it for a narrow and prosperous elite.

So the changes make both strategic sense in that they create a platform for a new type of open, networked, and large-scale party. Tactically, they put the Conservatives in a bit of a bind. That’s a job well done I’d say.

The foundation stones are being laid. There isn’t a lot of time to put the structure on top of them. The task is not impossible but Labour will have to accelerate if it is to get itself to the right position come May 2015. Don’t believe the polls. Labour and the Conservatives are roughly level as of now and the underlying momentum not yet seen in the numbers has been moving slowly towards the Conservatives.

This last week, and again it won’t be seen in the polls, has perhaps temporarily stopped that shift. More weeks of this type and the momentum may shift back again. Time is short but it can be done. We’ve seen ‘populism’ toned down and realism turned up. That’s a better basis on which to make a case for national leadership. That is what will decide the next election.

Anthony Painter’s latest book is Left without a future? Social Justice in Anxious Times

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