Friday 13 January 2012

Winning the economic argument: how to fight on Labour's own terms

Stephen Beer is the author of The Credibility Deficit he will be taking part in this Fabian Annual Conference. Afternoon tickets are still available. Please head to for details.

There could not be a more appropriate theme for this year’s Fabian New Year conference than the economy. Opinion polls tell us that Labour is still not trusted on economic policy, yet the Coalition has already had to rewrite its budget plans. The government plans even more spending cuts lasting beyond this parliament. In such circumstances, can Labour retain compassion for the worse off while regaining economic credibility?

That is the theme of a seminar I’m taking part in at the Fabian conference on Saturday. When faced with the severe cuts to spending, including on the welfare budget, compassion surely compels us to campaign against such measures vociferously. Yet we run the risk that people won’t believe we are serious about managing the public finances properly. In that case, at the least they will suspect we will put up taxes to pay for higher spending.

I argue in The Credibility Deficit, a Fabian pamphlet published last year, that Labour has to take significant steps to improve its economic credibility. These include a clear plan to reduce deficits and a clear plan for growth. Since the pamphlet was published, some on the Left have taken up the same theme and argued that Labour should be more focused on reducing government borrowing levels. The problem is that we can end up fighting the next election on the basis of Tory arguments about deficits, with Labour even promising to match Tory spending plans as we did before the 1997 election. Not only does that tactic concede ground to the Tories before we have even started, it is not likely to be enough to win the election. Instead, we need to convince the electorate that our spending will be effective and that their money will be spent in a way which will produce results and avoid waste or inefficiency. Furthermore, the Office for Budget Responsibility could limit Labour’s room for manoeuvre by declaring what it believed is and is not an acceptable budget. That is why Labour should announce an ‘Effective Spending Guarantee’ ahead of the next election, with independent verification of the effectiveness of any new spending plans we have.

There are two types of economic credibility. The first is with financial markets. Taking hard decisions on spending is one way to convince investors a government means business getting debt down.. However if they doubt those decisions will actually take effect (because, for example, public protests will force u-turns) they will stop believing budget plans are credible. They will also quickly become concerned if they believe growth will be too slow to deliver tax revenues and profits that were expected. The second type of economic credibility is with our fellow citizens; not simply on whether we have the right policies here and there but whether we have the right approach and will deliver. The right approach for Labour means holding fast to our values, emphasising that we are the same Labour Party, believing that everyone should have an equal start in life, that power (including economic power) should be dispersed and accountable, and that virtue has a place in markets. Broadly, that translates as building an economy not simply so that everyone benefits from the proceeds of growth (one way or the other) but in which everyone who can contributes to growth and has the opportunity to lead a fulfilling life. And in practice that will mean for example that we guarantee employment and do all we can to invest for our nation’s future prosperity.

Stephen Beer

1 comment:

Anonymous said...

Surely your argument is a lost cause. You talk of the 'Markets' as if they were an entity to worry about. These are the same 'markets' that New Labour courted throughout its tenure and aided in creating the 'deficit' that the Tories have jumped all over as an excuse to attack the Welfare State and the Working Class in general. Now is the time for a new way to think of economics; to move away from the concept of 'markets' and towards a societal answer to a capitalist problem. No one seems to ask the fundamentals: Where does the 'markets' get its money from? How can the 'derivative markets' have a value 11 times greater than the entire world economy? What real costs does this impose on economic losses within specific societies? How do we rid New Labour of its core 'Right Wing' Ideologies? Why aren't we investigating opposing economic models? Can we really trust politicians who have no experience of the consequences of their policies? How can we be led by an individual whose Father was a Communist, yet taught his son to be a capitalist? How should economic 'growth' really be measured? These are the fundamentals needed to take humanity out of the cyclical boom and bust that is paramount for the design within the Capitalist doctrine.
Words and talk are cheap, ingenuity and endeavour cost. So to rehash the same old same old does nothing for the advancement of human development. May be it is time you threw away such childish follies and became a man. Economics based on market forces can only deliver prosperity for the minority. This is an evident fact, demonstrable by the chasm that has developed between the 99% and the 1%. The British public's (99%) wage levels are now lower than they were in the 1970's taking into account industrial disputes and 'reported' low productivity.
A thought. Why not get yourself a manual job in a factory creating nonsensical, useless goods and try to survive on the penury they call wages? This may aid in eradicating your blind-spot on what 'Market' economies truly mean and deliver.