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Labour’s approach to central austerity question is still badly flawed

The biggest issue at the coming general election will be how the deficit is to be handled over the next 5 years. The Tory proposal is to continue with the cuts till 2018-9 by which time they claim the structural deficit will have been eliminated. Their real and stated objective is to have continued with the cuts sufficiently long, indeed in some ways to have been intensifying them because so much of the cuts programme is back-end loaded, so that the welfare state is reduced to its level in 1948, in other words to eliminate all the social advances of the last 70 years.

The Labour proposal, unless amended at the National Policy Forum tomorrow, is to continue the cuts till 2019-20 to show we have equal prowess with the Tories in cutting public expenditure and “taking tough decisions”, but with the gloss that this also involves big reforms to markets and the public sector. What’s to choose between them? What is missing, glaringly missing, is the alternative to austerity which the whole nation, let alone the Labour party, is crying out for.

If Labour wins the election, we will inherit whatever the deficit is at that point. We can do nothing about that, but given adequate preparation beforehand we can on the first day in government (or more realistically the first week) spell out a very different course for dealing with the deficit. The grounds for doing this are manifest from the policies pursued over the last 5 years. Alastair Darling responded to the financial crash and having to bail out the bankers by two budgets of economic stimulus in 2009-10. Budget measures take a year to work through, and by 2011 the deficit had come down from £157bn in 2009 to £118bn in 2010, a reduction of nearly £40bn in 2 years. George Osborne utterly repudiated this policy in June 2010 and initiated the systematic cuts in expenditure (£81bn) and in benefits (£18bn) which is the story of the last 4 years. As a result the deficit has been cut from £118bn to £108bn, a reduction of £10bn in the last 3 years.

So which is the better way of cutting the deficit? It’s a no brainer. But, the Tories will say, the economy’s recovering fast, so there’s no need for any further stimulus. But is the present recovery sustainable? Already the construction sector, 6% of the total economy, is stalling (0.8% down in the last quarter), and factory production has just taken recorded a slump. The trade deficit, made worse by the big jump in the sterling exchange rate in the last 6 months, is now reaching epic proportions. Wages are still falling, productivity remains obstinately low, private investors are still on strike, and unemployment is still 1.2 million. So this ‘recovery’ has no legs because there’s nowhere where future demand is coming from. Public investment is still needed to get sustainable growth. The alternative of public investment, big reductions in the dole queues, and sustainable growth is string us in the face. Why doesn’t Labour run with that?

3 Comments

  1. Robert says:

    So the offer is Cameron’s lot of Pure Tory-ism or Progress One Nation Disraeli-ism, which is a fiction, which does not surprise me. Labour are now well on a road to being the third choice Tory New labour One nation, Purple, Blue, the only colour missing is red. You even have the moronic Miliband saying I’m not red well we know that sadly we have no idea what the hell you are.

    I think the public will decide that labour’s copy of the Tories need not be an issue and they will vote for the real thing after all if you believe in deficit reduction then the Tories are the boys not the Progress One nation copy of something dreamed up by Progress.

    In the end I’ve a feeling labour are going to lose this one and if they are not careful they will lose the next one as well, and then once we have rid our selves of the Progress lice, I will be close to 100 years old and to be honest dead.

  2. swatantra says:

    Its about time Unions had their own party, had their own Manifesto and even put up their own candidates and challenged the status quo, and put their money where their mouth is.
    At present the Unions are a party trapped within a Party ie the The Labour Party.

  3. john says:

    the union view now reminds me 0f their view at the TUC 92′ confrerence, where one of them on stage said

    “this is the forth election we’ve funded Labour, this is the forth election we’ve told them what policies to have, and this is the forth time we’ve lost, I thinkwe shouldn’t support them”

    without spending a second to think that if the Unions hadn’t inssited on having policies the vast majority of the public or even core labour voters ,hadn’t wanted then the electorate wouldn’t have rejected us four times

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