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Does Labour really still believe it lost the 2010 election because Brown was soft on cuts?

red-rosette-who-e1332238875116If there is one reason why Labour may still lose the election next year, it is because the front bench is still fixated on cuts. It is even being suggested now that the reason why the vast majority of us are suffering from debilitating Tory spending cuts is because Brown didn’t promise to do much the same thing. Brown actually posed the 2010 election as being a choice between Labour investment and Tory cuts. According to the Blairite tendency which still infects too much of the Labour front bench, what he should have said was that the election was between Labour cuts and Tory cuts, where Labour would have cut less far, less fast (i.e. reaching the same destination, only more slowly).

That is nonsense, and whilst 2010 may be history now, it matters when exactly the same mistakes are being repeated today. Ed Balls still supports the Tory fetish for cuts in order to eliminate the structural deficit by 2019-20, on the grounds that Labour’s economic credibility depends on it. Chuka Umunna appears to take the same view when he says that Brown wrongly gave the impression in 2009-10 that Labour failed to understand the importance of tackling Britain’s unprecedented peacetime budget deficit. As it happened, the budget deficit in 2008-10 wasn’t ‘unprecedented’ in peacetime since a quite similar fiscal outcome occurred under the Major government in 1993-5, but let that pass. Far more important, however, is the crucial point that spending cuts represent an inefficient way of reducing a deficit because of itsfeedback effects on the private economy that reduce incomes and tax receipts. It may seem obvious that if spending is cut, the deficit will reduce. But it’s wrong, and perhaps qualifies under the category that ‘common sense is what tells us the world is flat’. 

The definitive evidence that spending cuts to reduce public borrowing is invalid comes from the ONS March report on the public finances. It states that “for the financial year 2013-4 public sector net borrowing (excluding the temporary effects of financial interventions) was £95.5bn. This was £14.8bn higher than the same period in 2012-3, when it was £80.7bn”. The correct way to reduce a deficit is by public investment in order to kickstart a sustainable recovery when private investment is flat on its back, as it still is in Britain today 6 years after the crash. The rise in incomes and tax revenues produced by economic growth far exceeds the deficit-cutting capacity of spending cuts. And it can readily be afforded.

A public investment package of £30bn, enough to get over a million people back to work within 2 years, would cost only £150m, or just 0.02% of government revenues, and would rapidly pay for itself a hundred times over. Or it could actually be funded without any increase in public borrowing at all either by requiring the publicly owned banks RBS and Lloyds to prioritise lending to British industry, or by QE target not at the banks but at agreed major industrial projects, or by a super-tax on the ultra-rich 1% of the population. Yes, investment, not cuts, is the right message: why doesn’t Labour shout it from the rooftops?

2 Comments

  1. jeffrey davies says:

    i didnt like this man but under lanour policys britain would have been better off and if the labour party had the balls (not him) to show the true figers under them it would show that the lies the tories spread are lies but still he keeps quiet when they beat em with it look at jobs were stacking shelves for those charitys who shouldnt be allowed to call themselves charitys has now they dealing in slave market yet ed leaves them get away with their lies not showing them up look at the local papers showing how corrupt that parliament is by allowing privitisation of the nhs when you got fingers in this pie times running out gentlemen and ladies you are robing the masses but they will wake to that fact jeff3

  2. John Reid says:

    There was various other reasons that we denied for ages, not having a referndum on Europe integration, when we said we would, we were burnt out after 13 yrs, the 3rd runway, Iraq obviously and immigration and the bigoted woman,over our own voters,also letting education spending get out of control,multi culturalism, letting the HRA have extremists be allowed to preach hate and violence, yet nanny state clamping down in those who criticised it,as called racist ,and trying then failing top to toe, changes to the NHS.

    There were on,y 2 issues we were more popular than the Tories on in 2010′ pensions, and law and order, and personally I didn’t agree with labours policies of 42 days,innocent people having their DNA kept,or naming those arrested for rape,and having their reputations destroyed, when they’d been cleared, but if the public said in polls, that labours issues on crimes such as ID cards were popular, I have to accept that.

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