Sunday, 28 September 2014

Against Austerity

Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works, argues that the Labour leadership's embrace of austerityis a fatal flaw in economic policy and must be rejected

(This article appears in the current issue of Labour Briefing)

It's rare that the origins of a mantra are traceable. But this one started with a post-it note left on a ministerial desk in the Treasury: "there's no money left" it read, and it was written by Labour's Liam Byrne MP for his Tory successor in 2010.

David Cameron and George Osborne were happy to repeat, reinforcing as it did their message that Labour had left the UK on the brink of bankruptcy. The UK wasn't anywhere near bankruptcy - not a single credit rating agency put Britain's debts anywhere below AA1 (one step down from a flawless AAA). Throughout the crash and recession the UK could borrow and borrow cheaply.

In the early days of opposition Labour urged that government austerity policies were cutting "too far, too fast", and urged the chancellor to "go for growth". As Osborne plunged the economy back into recession and unemployment rose in those early years, he actually relaxed austerity slightly but extended it - with the harsher years pushed back until after the 2015 election.

This makes Labour's position today all the more idiotic. The Labour frontbench though is now in the absurd position of still saying Osborne's economic strategy is wrong, but will implement an intensified version of it in 2015-16.

This is not just bad economics but bad politics too. The people voting to kick out the Tories in 2015 will be lumbered with the same economic policies. As Ed Balls told a compliant National Policy Forum, "Party members have endorsed the tough fiscal position Ed Miliband and I have set out. We will match the government's overall day-to-day spending totals for 2015-16."

Those spending totals imply cuts to both the education and health budgets and even bigger cuts across the rest of the public services. To put this in perspective, public spending will have risen marginally (by 0.4%) between 2012-13 and 2014-15, but in 2015-16 public sector expenditure will fall by 1.7%.

So if you feel like austerity has damaged your community and public services, after 2015 the really harsh austerity begins. Once you adopt the logic of austerity it is hard to escape.  You might think the shackles will come off in future years and Labour will deviate from Osborne's plans from 2016-17 onwards. However, the two Eds are further committed to not just balancing the books, but creating a surplus on the current budget, and getting the national debt falling.

That means that without overtly saying it, the two Eds are committing Labour to a parliament  of austerity. They say "we will govern with less money around".  But this is utter nonsense, there is no less money around. By all accounts the tax gap is growing, executive pay rose by 14% last year, the wealth of the richest 1,000 Britons increased by £70 billion in the last year alone and corporate profits look healthy.

They say "we will govern in the country's long term economic interest". But which economic interest? The interests of the economy of the city traders, the corporate boardrooms, the property magnates and the credit rating agencies?

Because that's not the economy that you and I inhabit: of people struggling to make ends meet, pensioners choosing between heating and eating, families in temporary and overcrowded accommodation, the person working three low wage jobs just to keep the bailiffs at bay.

Labour is letting people down because it's only economic policy is to hope to manage austerity better than Osborne. I want to kick the Tories out, reverse NHS privatisation and end the bedroom tax, but the Labour leadership puts at risk any of their positive reforms if they stick with austerity.

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