Why are the Tories now standing at their highest polls since the election? This has of course given Ed Miliband’s Blairite enemies, both in the Shadow Cabinet and the PLP, the chance to dump on the leadership which is always the silver lining for them when there’s bad news. They like to claim that, given the government’s vicious austerity programme, Labour should now be 10-15 points ahead, not 5 points behind. But the truth, as so often, is very different and much more complex than that.
The real reason is that Labour has allowed the public to get imprinted on its mind (much assisted by huge right-wing media hostility) two crucial ‘facts’, both of which are wrong. In addition Labour has failed – indeed not even seriously tried – to get across two equally crucial truths about the deficit. For these reasons, if the austerity deepens and lengthens as it will, then so far from that experience forcing the electorate back into Labour’s arms, it will actually have the opposite effect and will likely increase the Tory lead. This is why.
Stop anyone in the street and ask them what they think about the economy; they are likely to say two things. It was caused by Labour over-spending, which left a colossal debt to be paid off, and although what the Tories are doing is painful and harsh, it had to be done because there was no alternative. Both beliefs are wrong. The last Labour government did not over-spend: the budget deficit was 3% of GDP before the financial crash of 2007-8 and 11.6% after it because of the massive bank bailouts. That needs to be repeated over and over again by Labour spokespeople, but it isn’t being.
The second belief is equally wrong: one possible way to cut the deficit is to chop expenditure, which is the government’s route, but the other, much better way is to create needed jobs (house-building, infrastructure improvement, laying the foundations for the green economy) which reduces the enormous costs of unemployment and increases Treasury revenues through income tax, NICs and VAT when people work and earn.
Labour then needs to get across two other crucial points. One is that creating jobs does not mean borrowing more money when the debt already enormous. Capital gains tax at 28% on the increase in wealth of the richest 1,000 persons in Britain since 1997 – no less than £297bn according to the Rich List – would yield £83bn, enough to pay off half the deficit and still leave enough to create half a million jobs. The other crucial point that Labour should continually be making is that the Osborne strategy has been tried twice before, by the Geddes Axe in 1923 and the May Committee in 1931, and on both occasions it led to persistent anaemic growth which was only brought to an end by the Second World War.