Ed’s speech: the missing bit

Pity poor Ed Miliband. Think of all of the weeks of preparation which he and his team must have spent on his conference speech, the last before the General Election. The speech which was designed to set out Labour’s vision for the country: a vision which was going to persuade us to give it a mandate for change. And after all that work, the only thing which anyone will ever remember about it is that he forgot the bit about the deficit. They might also remember the bit about meeting Gareth and Colin but I doubt they will do so without laughing. Can you imagine the rictus smile this has put on the faces of Lynton Crosby and the Tory strategists? What fun they will have at Ed’s expense come their conference in a week or so.

And yet, what, in truth, did we miss? Unless Ed and his speechwriters were planning a radical change of tack, there would have been nothing to dispel the established wisdom that Labour caused the economic crisis and nothing to convince the voters that they had any coherent plan for the economy now. And as Peter Kellner of YouGov reminded us the other day, to win a general election, you need a popular leader or you need to be trusted on the economy. Labour currently fails on both counts. While I fear that Ed’s popularity is, unfairly, a lost cause, there is certainly something that Labour can and must do to restore economic credibility. So here is what he forgot to say, not only in his speech but at any time since he became leader.

Labour didn’t cause the banking crash and it didn’t cause the recession. Neither was caused by government overspending. If it had been, how come the crash and the recession were global events and how come the Tories were promising to match Labour’s spending plans? In 1997, Labour inherited a deficit of 3.9% of GDP and by 2008 it had fallen to 2.1%; so Labour halved the Tories’ deficit. In 1997, Labour inherited a debt of 42% of GDP and by 2008 it had fallen to 35%; so Labour cut the Tories’ debt as well. Over the 18 years of Tory administration to 1997, there was an average budget deficit of 2% of GDP. Over the next 11 years of reckless, profligate, Labour, there was an average surplus of 1%.

But in 2008, the global financial industry brought the global economy to its knees. The UK economy suffered an immediate and devastating loss of economic output and the government not only had to spend hundreds of billions, directly and indirectly, bailing out the banks but also had to take urgent steps to stabilise, and then to stimulate, the economy. VAT was cut, infrastructure projects were brought forward and businesses were given extra time to meet tax bills. Those challenges were faced by every major developed country and were most acute in those, like the UK, with a disproportionately large financial sector.

The economy was saved, but meeting those challenges and taking those steps inevitably, and exponentially, increased both the UK deficit and its overall debt. But we were never a Greece. We were never going to default on our debt. And by the time of the 2010 election the economy was, slowly, growing again. This was, in short, a financial, not a fiscal, crisis.

And that matters because of the use to which the Tories put the crisis. While Labour was spending six months of introspection in electing a new leader, the coalition cemented an unanswered narrative in the voters’ minds that we were on the edge of bankruptcy because of Labour’s reckless spending. And because the problem was too much spending, the answer was to cut that spending to the bone and to impose austerity. The Tories must have thought they were dreaming. They were able to do what they always want to do – slash public spending and cut public services – and were able to blame Labour for it.

And what has austerity brought us? Forget the human cost, the wasted lives, the payday lenders, the food banks, the zero hours contracts and the poverty wages. Judge it on its own terms. It killed economic growth and gave us the weakest recovery in 300 years; Osborne’s promise to eradicate the deficit remains a pipe dream and the government has accumulated more debt in four years than Labour did in thirteen. No recession, still less one this deep with this cause, has ever been solved by austerity. Neither was this one.

Labour made mistakes in government. It should have properly regulated the City and not allowed the banks to gamble with our money. It should have replaced a stock of public housing which had been so depleted by twenty years of council house sales. It allowed tax credits to boost corporate profits by subsidising low wages. It should recognise those mistakes and promise to correct them next time. But never forget that the Tories wanted less, not more, control over the City and still do. They have no interest in building council houses and they have always been opposed to any sort of minimum wage.

This is what Ed should have said and what he and his party should be shouting from the rooftops from now until May 2015. Labour has interesting, constructive, policies on a range of issues. But unless they form part of a coherent, compelling, narrative, and until Labour’s economic credibility is restored, no one will be listening.

John Whitting is a QC