Investment not cuts – Labour needs to deliver a decisive break from austerity

Ed Miliband has a significant opportunity to decidedly shift the terms of the debate on the economy, but to do so he will have to turn Labour policy on its head.

The austerity agenda which has dominated the UK’s economic debate since 2010 is increasingly seen as inseparable from a stagnant economy and growing poverty and unemployment. With the case for austerity crumbling, the discussion on the alternative policy required to deliver growth and jobs is now beginning in earnest.

A number of us have consistently advocated ‘investment not cuts’. We believe Ed Miliband and Ed Balls need to break from the New Labour orthodoxy that advocates the party’s own austerity programme.

Since 2010, the party has been hamstrung by Alistair Darling’s ill-advised claim that Labour would impose ‘deeper and tougher’ cuts than Thatcher, or Liam Byrne’s infamous note left to his Tory successor saying ‘there’s no money left’.

Commenting on this, Peter Hain said:

some, sadly including anonymous Labour frontbenchers, suggest that the only way for Labour to win back the economic trust lost in the global banking crisis is to sign up to the Tory-Lib Dem post-2015 election spending plans due to be announced in the budget next week.”

Discredited as they are, Labour can no longer advocate spending cuts. Its election message needs to be a decisive break from Osborne’s austerity agenda.

In recent months, a number of Labour MPs have begun to consider the necessary means to deliver an investment alternative.

The way to bring the budget back into balance is to ease the squeeze by boosting public sector investment.”

John Healey wrote:

More borrowing by government is now the right thing to do, not the wrong thing; part of the solution not the problem … for investment to improve longer-term productive capacity as well as create jobs, generate tax revenue and revive growth.’

In addition, Owen Smith has discussed the policies we need to:

realign finance towards productive deployment in the real economy, leading to living wages, high employment and long-term investment and to supplant the culture of flexibility, corporate cronyism and short-term return that have become the norm.”

But they are not the only ones advising Ed Miliband and there are alternative messages to beware of.

The message from Progress at its recent conference was on the need to match tough and unpopular decisionsthat the Tories would be prepared to take, with the reheated triangulation of a compelling programme of public service reform and innovation’. Progress continue to argue the necessity of winning over voters from the Tories, when, as Andrew Harrop recently said:

for every one ex-Conservative, there are roughly three former Liberal Democrats and two people who didn’t vote in 2010 now saying they will back Labour at the next election.”

Similarly Labour should reject a Blue Labour alternative that can be backed by The Sun newspaper for ‘promoting family, faith and flag’, for ‘being tougher on benefits’ and for being ‘hard on immigration’.

And equally concerning is the Compass offer, despite advocating a housing construction blitz, if funded through radically pruning central government and iron, independently enforced fiscal commitments’, even if consequences are brutal, as John Harris recently suggested.

Labour must embrace borrowing to invest, not fund it through cuts – such as to child benefit – elsewhere. This would be politically disastrous, harming Labour’s supporters.

The point of debate should be on the scale of stimulus. As Peter Hain noted, the CBI has called for an extra £10bn in infrastructure investment, the IFS for an extra £20bn of public investment,the TUC, for a £30bn programme of infrastructure investment.

We should be prepared to consider even greater borrowing as the policy must be commensurate with the scale of the crisis. We are in a historic slump, so we must prepare a radical response.

Next Generation Labour has invited Peter Hain MP and John Healey MP to outline their views further on a panel with Catherine West (Leader of Islington Council), Heather Wakefield (Head of Local Government, UNISON) and Mick Burke of Socialist Economic Bulletin.

Don’t let the Tories set the agenda: Back public investment not cuts
6.30pm, 10th June
Grimond Room Portcullis House

This post first appeared at Next Generation Labour