20.06.2013

Labour Party: Safe pair of Eds

By promising to keep within Tory spending plans, writes Eddie Ford, Ed Miliband and Ed Balls are trying to show that Labour would be a responsible party of government

We now have a glimpse of what a future Labour government will be like. After months of careful planning, Ed Miliband and Ed Balls in recent weeks delivered choreographed speeches pledging that Labour will work within the coalition government’s spending plans for 2015-16. Austerity is here to stay no matter who you vote for, so get used to it.

One trigger for the reconfiguration of Labour’s policy is the imminent June 26 governmental spending review, the day on which Osborne outlines where the next £11.5 billion in cuts will exactly land, and, of course, the general election - a mere 100 weeks away, with the polls nowhere near as good as they should be. The two Eds therefore decided that a firm message had to be sent out saying that capitalism would be safe in their hands. They have, in fact, fully accepted the logic and limits of austerity, as laid down by George Osborne (but not the capitalist class as a whole). A Labour administration would reverse neither the cuts nor the fall in working-class incomes. There will be no ‘crisis of expectations’ as nobody in their right mind will expect anything.

Iron discipline

In his June 3 speech denouncing the government for “failing catastrophically” on jobs and deficit reduction, Balls promised to impose “iron discipline” at the treasury and introduce a “tough deficit reduction programme”. Given the likely “bleak” state of public finances by the time Labour comes to office, he said, it would be “completely irresponsible” for Labour to pledge higher spending in that year or beyond.

There were some clearly identified areas for cuts, Balls stated. Like the “shake-up” of police commissioners, merging the High Speed 2 project into Network Rail and cancelling the planned ‘Titan’ super-prison. His principal proposal though, or so it seemed, was for the abolition of winter fuel payments for the “rich” 600,000 pensioners over 61 who pay higher and top income tax rates. By ending the £200 or £300 payments to these relatively better-off individuals, Balls will save about £100 million - or a whopping 0.5% of the welfare budget. In that sense, the move would be utterly insignificant. Small beer. But scrapping the benefit would have a highly totemic value, especially seeing that only five months ago Miliband grandly declared that universal benefits were “part of the badge of citizenship”, whereas means-testing creates “problems of unfairness”. Labour is now signalling that it is not a defender of universal benefits.

Then, in his follow-up June 14 speech to the Fabian Society, the shadow chancellor was if anything even more explicit about his plan to win back “public trust” - ie, win over sections of the bourgeoisie and its media. Firstly, and most crucially, Balls made no bones about endorsing Osborne’s public-sector pay freeze. It was “inevitable” that public-sector ‘pay restraint’ would have to “continue for longer” in this parliament - Labour “cannot duck that reality”. It was a clear choice: either increase public-sector pay or tackle rising unemployment - you cannot do both. Labour had to offer an economic alternative that would boost growth now and deliver “responsible capitalism” over the longer term.

Indeed, Balls went on to argue, the cuts may need to continue “beyond” the end of the current parliament. In fact Labour could not and would not make “any commitments” before the next election to reverse the coalition government’s austerity policies. Why? Because, apparently, “we don’t know how bad things will be on jobs, growth and the deficit”. Hang on: is that not the kind of argument George Osborne made on becoming chancellor - once he realised just how bad the public finances really were, he had no choice but to inflict greater cuts than originally planned? In other words, if capitalism took another downward dive Balls would wield the knife. The incumbent government’s austerity has produced a double dip recession and expectations of long term stagnation, in the process decimating public revenue and the tax base. Therefore, reasons Balls, Labour should commit itself to … continued austerity. Economics of the madhouse.

Naturally, Balls added that he would not have taken the “same approach” as the coalition to tackling the deficit as the coalition - hey, we’re Labour, remember? Instead, it almost goes without saying, his hypothetical Labour government would have cut slightly less deep and fast and, of course, the next Labour government - we can hardly wait - would also have to “deliver social justice” and fairness. In between, that is, the cuts and attacks on the working class.

Laser focus

Of course, Ed Miliband had staked out the same territory in his June 6 address to “business and community leaders”. Acting the statesman, he announced that his party would introduce a welfare cap. For instance, Labour would retain the cuts to child benefit - it had spent “too much” on incapacity benefit between 1997 and 2010.

Miliband even felt compelled to include in his speech an insistence that he would not tolerate “worklessness passed from generation to generation” - probably a response to Iain Duncan Smith’s complaint about families in which “three generations have never worked”. Incidentally, a survey by the Rowntree Foundation comprehensively blew that hoary myth out of the water. It discovered that only 0.1% of households have two generations that have never worked and they were unable to find a single one in which three generations have never worked. Yet regardless of objective reality, the war against generational worthlessness must be fought. After all, it makes a good Daily Mail headline.

Under a Labour government, Miliband pledged, state benefits would rise by less than inflation each year. Up until the Newham speech, Labour had suggested it would restore the link between benefits and inflation if it regained power. Hence it voted against breaking the link in April, when the coalition pegged the annual uprating to 1% for the next three financial years up to 2015-16. Obviously, breaking the inflation link for most benefits would leave millions of claimants with an effective benefit cut.

Noticeably, the Labour leader declined to give too many concrete details in his speech - even if the line of march was more than clear. But Miliband has denied that the welfare cap would mean cutting benefits for individual claimants. For example, some of the £24 billion a year spent on housing benefit would be switched to house building by allowing councils to “negotiate” with landlords on behalf of social housing tenants, which he argued would help bring down rents and in turn reduce housing benefit bills. In this way, Labour claims the savings could allow local authorities to build 200,000 homes over four years.

As the two Eds’ recent road shows confirm, there no fundamental difference between Labour and its coalition opponents on the big policy issues. The Tory press has taken delight, naturally, in suggesting that the recent speeches amount to a declaration of surrender - austerity has won. Mark Steel too has mocked the two Eds in the pages of The Independent: “To show how responsible we have become, we promise that if we win the election, for the first two years we’ll let the Tories carry on as the government” (June 6).

New regimes

Meanwhile, George Osborne on June 12 effectively sacked Stephen Hester as boss of the Royal Bank of Scotland, which is 81% government-owned. Only 48 hours after Hester’s shock departure, Paul Tucker - the deputy governor of the Bank of England - announced that he too is going in the autumn. He failed to secure the governorship after losing out to Mark Carney, a former governor of the Bank of Canada - who formally replaces Sir Mervyn King on July 1.

This means that very shortly there will be new regimes at both the RBS and the BoE. Leading the Financial Times to speculate, with quite a large degree of justification, that Osborne is seeking to “reshape Britain’s financial landscape” in preparation for the next general election (June 14). In the opinion of the FT, the chancellor’s “focus is now expected to be on growth” - with Carney’s investiture marking a “renewed emphasis on monetary activism”. A “transition” that comes at a time when Hester’s replacement will “accelerate RBS’s reincarnation as a UK-focused commercial bank pumping credit into the economy”. How fortuitous. Although there were few policy differences between Tucker and the treasury, notes the FT, his departure will remove from the BoE’s monetary policy committee a dissenting voice against greater monetary stimulus.

If so, then we could be presented with a weird and perverse situation within the next 100 weeks. It is not entirely impossible that in the lead-up to the election Ed Balls and Labour will be arguing for “iron discipline”, whilst Osborne and the Tories - desperate for every vote with the United Kingdom Independence Party breathing down their neck - are making noises to the effect that austerity has done its job and it is now time to put the foot on the accelerator.

All of which poses an extremely awkward, but unavoidable question for the People’s Assembly, about to hold its official launch on June 22. Fronted by John Rees, the PA is essentially an alliance between Counterfire, the Communist Party of Britain/Morning Star and the left of the trade-union and labour bureaucracy. Here is the rub. PA is predicated on either forcing the existing government to reverse its austerity programme or, failing that, replacing it with one that will. Come the next election one would expect Katy Clark, the CPB and PA-sponsoring unions such Unite, CWU and Unision to actively campaign for a Labour vote. And what is an anti-austerity government anyway? A cross-class popular front committed to a fair and decent capitalism? That is certainly what the Green Party and its one MP want. So the problem with the PA is that it knows what it is against, but is incapable of delivering what is realistic, positive and necessary - a government of the working class and socialism.