Wednesday 14 July 2010

How should Labour challenge the Coalition's economic narrative?

Pat McFadden spoke to the Fabian Society on this morning, in a significant speech titled Neither Thatcherism nor denial, looking at how the Labour party could challenge the Coalition's argument that its approach to deficit reduction was unavoidable, challenging Labour to offer a credible alternative in order to get a hearing from the public, and arguing that the leadership candidates need to open up a broader public debate about growth and the future shape of the UK economy.

The shadow business secretary's speech, hosted by the Engineering Employers Federation in London, was previewed in today's Guardian, and can be read in fullon the Fabian website.

It will help to shape a significant debate about the party's political strategy and argument in opposition. McFadden argues that the party must be seen to acknowledge that deficit reduction, including some spending cuts, are necessary, in order to get a hearing for the argument that the coalition's cuts go further, faster and are harsher than is justified or necessary, and to bring the question of growth

How Labour should challenge the Coalition's economic narrative, what its own approach should be to economic growth and to deficit reduction, are likely to play an increasing role in the debate between leadership candidates over the party's economic strategy.

There were the main points.

(1) The government's narrative has mostly succeeded in framing the economic agenda.

Their main point is an accusation that Labour was profligate and economically incompetent in Government. That by our actions we made the recession worse, not better. And that we left a huge problem for the incoming Government, requiring them to take drastic action.

It is claimed that the Government’s actions are born out of necessity, not choice. They don’t really want to be making these cuts or imposing these taxes. They simply have to. And this argument is used to absolve the Government of all responsibility for their decisions. Everything from the VAT rise to the cancellation of new schools is blamed on the previous Labour Government.

(2) Labour must challenge the 'there is no alternative' argument

McFadden argued that the Coalition's argument is founded on an argument which denies there are political and policy choices.

Labour should mount a strong defence of the choices it made in responding to the recession, and challenge the "absurd", unfounded argument that the UK faced the risk of a Greek-style default. This amounted to an attempt by the Coalition to evade responsibility and ownership for its own choices in power, by arguing that everything it has done was unavoidable because of its inheritance from Labour.

The new Government on the other hand has chosen to put Britain at the head of a new drive for austerity. It has chosen to cut faster and cut deeper than we would. It has done so with no accompanying plan for growth or for jobs. We know from the Treasury's own figures their plans will destroy jobs in the public and private sectors. And yet they make huge assumptions about the private sector stepping up to the plate and creating millions of jobs with no plan for how it is to be done.

This is faith based economics, with the Conservatives in the role of the High Priest and the Lib Dems displaying the zeal of the convert. It imposes enormous pain on the country and takes a huge risk with our future.

It cannot be blamed on the Labour government because it is based on judgements which the Conservatives and Lib Dems have shared. And therefore they must take the responsibility for the pain that those choices will inflict.

(3) Labour will be 'tuned out' by the electorate if it is perceived as having nothing to say but 'fight the cuts'

Yet McFadden warned his own party that it would not be credible if it took refuge in a purely oppositionist stance, and withdrew from its own acknowledgement that it would have had to reduce the budget deficit in power.

Unless we absorb that I believe there is a danger of being tuned out by the electorate. By contrast, acknowledging it increases the chance of our fight against what the government is doing being heard.

“Fight the cuts” is a tempting slogan in Opposition, and there are indeed some that must be fought. But if that is all we are saying the conclusion will be drawn that we are wishing the problem away.

As the pain of Government cuts bites, public opposition to them will grow, but people will still want to know what we would do differently - and they won’t believe us if our answer is just that we could make it all go away.

(4) The Labour leadership contest now needs to move on to focus more on the future than the party's record in government

Of course it is right to acknowledge where we went wrong in Government. After all, as one wise local member said to me, if we had all the right answers, how come we lost? And all of us could pick decisions or positions adopted that damaged us or we disagreed with – though we would not all pick the same things.

But the bigger point is that going through each difficult decision taken in Government and telling people it was all a mistake or even contrary to our values is in the end not leadership. Leadership is and always must be about the future. And our economic story is the foundation of this future, everything from tax and spend to skills and trade.

(5) What is the vision for the UK's economic future - and what role must government play to pursue it?

McFadden acknowledged that Labour had been "late to the game" on developing an effective political economy and account of the role of government. But he warned that the Coalition risked leaving itself unable to will any credible means for public policy objectives it claims to share - rebalancing the economy, promoting high skills, and managing the transition to a low carbon economy - because it lacked a positive account of the role of government in promoting growth, beyond getting out of the way.

There is an essential role for Government in a modern industrial economy. It is about creating capability, ensuring the right infrastructure is there, ensuring the right skills are there, the right planning environment, the right research excellence and having the will to make it happen.

And yes, that will require Government funding in some cases. Markets may produce good outcomes in the round but they won’t always get every decision right.

The new Government have talked a lot about what they won’t do in these areas but have said next to nothing about what they will do.

They seem to ignore the role of growth in getting the deficit down and the government’s role in rebalancing the economy.


Stuart White said...

Pat McFadden poses the alternatives as 'Either cut or do nothing' and, having posed this choice, says that Labour cannot credibly stand on a position of 'fight the cuts'.

But the choice he poses is a false one.

The alternative to cuts is not necessarily to do nothing but to raise taxes. One possibility, for example, would be to split the burden of meeting the deficit 80/20 towards tax rises/spending cuts rather than the other way around.

Why does Pat McFadden apparently ignore this eminently reasonable social democratic possibility?

Sunder Katwala said...


I don't think he does ignore the ratio question, though he was not drawn on the precise balance he would addvocate. He says "the balance between cutting spending and taxation measures would have been different. ... It would have been done in a different way on a different timescale and with very different priorities".

The content of his position is that Labour should not resile from the position that it would halve the deficit in one Parliament, and it would lose credibility for doing so. (Labour's position was to do so on a 66:33 basis).

Others (Andy Burnham, for example) seem to be arguing to maintain that position, but shift to a 50:50basis. McFadden was asked about that, but I don't think explicitly expressed a preference between those different ratios, while being against 80:20 and in favour of having a deficit reduction plan. You suggest it could be 33:66 or 20:80. It seems to me the argument would depend on arguing for the particular tax measures which would make up a good deal of that social democratic version of deficit reduction, and advocating which spending can be maintained with that choice.

The implication of McFadden's position is something like: we will be more credible in opposing some cuts (which might be a third or half) and saying these are ideologically driven if we are clear that we don't oppose all cuts, and that some are necessary.

This raises the question of the pros and cons of how much detail an opposition party should offer in saying which tax rises and or which spending cuts you would support, and which you would oppose, and in how much detail in for example the first year of a Parliament when the next election (and the chance to act) is probably some way off.

Stuart White said...

Thanks for the clarification, Sunder, I should have read the original piece more carefully....

It would be nice to see some analysis at Next Left of alternatives, e.g., what an 80/20 tax rise/spending cut programme might look like, and what its distributive implications would be....