5 things I’d say about “In the Black Labour”

(The below is just me: My "In the Black" co-authors, Graeme Cooke, Anthony Painter and Adam Lent, and the wonderful people at Policy Network who have agreed to publish our little paper, shouldn't be held responsible for any stupidities of mine!)

Rather frustratingly for my media profile, I've a really busy day at work on Friday, so will only be able to intermittently respond to what may be a torrent of abuse, a burst of applause or derisive raspberries following the much heralded appearance of "In the Black Labour".

I'm writing this on Thursday night, with no knowledge if we've got any coverage, or how it's been interpreted and spun or who it has pleased, angered, disappointed or enraged. Heck, no-one might have even noticed it's come out.

(In any case, here's a link to the full paper, so you can have a read.)

1. It's intended as the asking of a question, not the start of a faction.

We're deliberately calling "In the Black Labour" a discussion paper, because we think the issues we raise should be debated. So it's as short and as bold as we could make it, and as clear as we could write it.

What is not is detailed or authoritative. Anyone who points out we do not go into sufficient detail is quite right.

Anyone who points out we're just a bunch of quasi-wonks with no democratic or individual mandate is also quite right. This is especially true of me as I'm not even a proper wonk.

The only reason to listen to us is that we might be saying something interesting and insightful. If we are, then we'd like the Labour movement to talk about that . If we aren't, feel free to dismiss the paper, and me, entirely.

It's also not a faction fight. For myself, I just really want a debate with the left and the right about something I think is important. This isn't about Blair or Brown, or some inheritance thereof. It's about what the next Labour government does and how it wins. We're trying, to be constructive, not destructive.

(oh yes, and the name's lighthearted. We think the trend of linking every nascent political idea with a colour is so over. We're trying to stamp it out with self-mockery.)

2. The core argument is that there's nothing right wing about fiscal conservatism.

In it's most simplified form, all fiscal conservatism comes down to to is an acknowledgment that all state debts have to be paid eventually, and that therefore it is best to take a cautious, careful approach to the public finances. It's good, small-c conservatism we support, not big-C Osbornomics.

We say the left should be particularly passionate about this because fiscal crises kill left wing governments and leave the poorest and most vulnerable exposed to the likes of Cameron and Osborne – or at least they do if we don't appear to have a way to deal with them.

We also argue that it's entirely possible, even necessary, for long-term social justice to go hand in hand with a fiscally conservative, careful approach.

 

3. Fiscal Conservatism for the long term doesn't mean Fiscal stupidity in a crisis.

The government messed up because they got the short term economy wrong. We saw on Tuesday how we're all paying the price for that. In a demand crisis, you need to take action, and do so dramatically and boldly. To do otherwise isn't being fiscally conservative, it's just being stupid.

Equally, that classic Keynesian approach in a crisis requires a careful, cautious approach the rest of the time. This is for two reasons. First so that when a crisis does appear, you can access the scale of resources needed to deal with it properly. Second, so that after the immediate crisis passes, you can be confident the markets will lend to you, because they are confident you will repay.

So in our paper, we focus on ways a Labour government can show it would be cautious and careful over the medium term, so that it can act, as needed, in the short term. There are various rules and structural steps that can be taken. One such rule, which I quite like, which isn't in the paper, would involve an obligation, policed by the OBR, to run a current spending surplus in any year when growth is projected to be over 2%.

Other rules or structures may be more effective, or better constructed. I happily defer to those with greater expertise on this.

4. If there's nothing right wing about Fiscal Conservatism, that creates an opportunity for the left.

Left unsaid in our paper is an argument the left might consider. If our governing constraint is a need for medium term fiscal restraint to secure stability in state finances,  and so the social agenda boils down to pursuing policies to deliver higher living standards within a framework of fiscal stability, then why not argue clearly for higher taxes?

It's not a position I support, personally, but rather than playing down the need for fiscal restraint, surely there's a debate the broader left can have which says, "Yes, we need Fiscal stability: We just need to tax more to deliver that and social justice".  For me, that would result in a meaty, meaningful political debate, and one that would represent a real challenge to my political thinking..

5. The left needs an argument about the future more than one about the past or the present.

In a previous article, I talked about Labour's past.  I felt the core lesson from our recent past was that Labour needed to develop a Social Democratic political offer in an era of no money. In essence my contribution to this paper was to argue we need to about sketch out what that offer might be, and why it matters. 

Anthony, Adam and Graeme are all more economically savvy than I am, so any economic points should probably be addressed  to them, but I think we've set out some ideas – a strengthened OBR, new fiscal rules, zero-budgeting, moving resources from services to productivity drivers and from current to capital, focus on higher private sector employment and wages, but there may be others, or things we've missed or glaring gaps.

So we welcome a row, rather than fear one. This is a discussion paper, after all. It's nothing without the discussion. One question that occurs to me as a politico, not an economist is this: The right of the Labour party has classically relied on electability as its trump card in internal political debates.

It's certainly not clear that the offer I set out is a electorally attractive one for a left of centre party to make. It's at the very least an open question. So do we on the Labour right have to forget thinking about electability for a while, and focus on what's right in policy terms? Do others, who might see in this electoral disaster and disenchantment of current Labour supporters, have a point- or not?

 

27 Responses to “5 things I’d say about “In the Black Labour””

  1. Matthew

    Are there details of these rules anywhere? Taken at face value this one:
    "One such rule, which I quite like, policed by the OBR, is to run a current spending surplus in any year when growth is projected to be over 2%"
    would have required George Osborne in March to have announced spending cuts for the next financial year of 5.8% of GDP, or about £76bn. In practice given this would obviously depress GDP they would probably need to be a lot higher. Then in November he would have had to scrap the plans, which surely would be terribly complex and a disaster for confidence?
    And you quite often get GDP growth of more than 2% in a year after a deep recession. A similarly huge tightening would have been needed in 1993. 
    I think you can only really go with Brownite notions of economic cycles and debt/gdp ratios but obviously these things are complex and subjective; there might be better ways. Do any countries have successful fiscal rules (Germany passed some form of balance budget policy but I don't know if it has been successful)
     

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  2. Paul Newman

    The  problem, rhetrorically, is not really the fine tuning of demand ,(a pro wrestling match at best). The problem is that  you have tried to construct an argument for fiscal conservatism  that also supports greater borrowing  now,and ,by extension, Ed Millibands direction.In business we say "Later means never", there is a reasons for that.
    Pepes judge, not  just on what people say  ,but on what they have done . Labour built the deficit  and every word remains off message if "You can trust us not to do it again" is the message. A completely new langauge is required,  a new instinct .
    Ed Milliband, for example, only weakly distanced himslef from the Pensions strikes .No Labour leader ever outright supports a strike. In his compromised  position a strong condemntion on clear grounds of fairness was available and necessarry to regain  any traction with the lost Labour voters  of the South et al
    I understand you are singing to the broad choir here , but for the wider electorate what you say about now is  the  area and not just on  inscrutable figures but on  hospitals closing , schools underperforming  where the default answer has for years been " Throw money at it "
    Still I am intruiged at least   and I shall enjoy looking at the whole paper when I have second.
    Can you give a concrete exmaple of how "In the black Labour" , might approach a real local issue that means something to people ?

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  3. Madjay

    It is completely wrong to say 'Labour built this deficit'. In 2007, before the BANKING crisis blew us all up, UK goverment debt was a lower % of GDP then it was when labour came to power in 1997.
     

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  4. Philip Walker

    Madjay: it is a classic diversionary tactic to deny that 'Labour built the deficit' by pointing to a lower debt-to-GDP ratio.  You confuse deficit with debt and ignore the fact that the ratio has been climbing since about 2001.  The deficit arises from spending outstripping tax receipts, and Labour is entirely responsible for that overspending.  Entirely.  As in, Labour promised for their first term to follow Ken Clarke's budget plans: it was a part of the strategy to earn the public's trust on the economy.  So when Gordon Brown went into the Treasury in '97 there was a surplus for that first term because in effect Ken Clarke was still in charge; but Brown chose — *chose* — to run a deficit from about 2001 onwards.  It is a Labour's deficit; there is absolutely not a shadow of doubt in the historical record at all in any way, shape or form.
    And if you believe the people who know better but keep propagating the lie, then more fool you.

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    • Blue Canary

      However, it is equally true that until the banking crisis the Conservatives under Cameron had committed themselves to following Labour's spending plans.  So even if your argument, that Labour created the deficit, was right, it would be just as true to say that the Conservatives, had they been in power, would have also created it.  Of course, if you can point me to any pre-crash statement from a Conservative front-bencher that advocated lower spending (or for that matter tighter regulation of the banking sector) I'll happily review my position.  Hindsight is a wonderful thing, but let's not mistake it for foresight.
      That said, the general population have concluded that the deficit was Labour's fault, and that is the political reality that the party have to face up to.

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  5. MV2

    Large deficits always accompany a deep recession especially one caused by unprecedented banking system failures. The result – more people out of work, more being dished out on benefits whilst tax collections drop. Businesses make less money, collect less VAT and a huge rise in companies going bust. From Woolsworths to Skyjet - and now household consumption is dropping like a stone
    Not a problem symptomatic to just the UK but one everyone is having to deal with. You can't single out the last government for causing the deficit
    Quite simple really - income down vastly since 2008 and spending continues to rise steadily

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  6. hopkin

    It is not true that Labour built the deficit – the financial crisis, which nobody in any party in the UK had predicted – accounts for the bulk of the current shortfall. If regaining Labour's credibility has to be built on a Conservative manipulation of recent history, then we really should all go home.
    If Labour had been more cautious, the deficit would have been a bit smaller for sure. But the main way in which Labour was incautious was in refusing to address the need for higher taxes. The countries with the strongest budget positions in Europe at the moment are Sweden, Denmark, Finland and the Netherlands, and they all have higher tax burdens than us. Labour's spending increases have been vastly overstated, and public spending only looks big now because of the collapse of GDP.
    Deficits are not just about spending, they are about taxation too. New Labour bottled out of explaining to people why taxes needed to go up to pay for better healthcare and social services. No amount of fiscal rules is going to get us off the hook – we have to persuade people to pay tax, or we will never have any credibility as a social democratic party.

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    • Brian Hughes

      You correctly point to one of New Labour's failures – the failure to explain the need for higher taxes to support reasonable levels of public spending; we couldn't live off privatisation proceeds or North Sea oil windfalls for ever.  The greatest mistake that Gordon Brown made (apart from thinking he was leadership material) was reducing the standard rate tax.  The greatest block in Tony Blair's thinking was on higher rate taxes.
       
      There is very little evidence to support the 'higher taxes discourage entrepreneurs' myth*.  If it were true Richard Branson and Alan Sugar (to nmae but two) would never have got started.  When they set out on the road to fame and riches the highest tax rate was 19/6 in the pound – that's 97.5%.
       
      But the low-tax genie is out of the bottle and can never be put back – at least not until the memory of Labour's defeat in 1992 fades.  Ironic because that defeat may have had just as much to do with Neil Kinnock making an arse of himself at the Sheffield Arena as it did about the Tories' clever double whammy campaign.
       
      So like it or not we seem to be stuck with the least-worst option being Labour having to appear to be nothing more frightening than Tory-lite and sneaking some good leftie things past the Daily Mail almost by stealth (New Labour managed plenty of those – but the evil that men do lives after them, the good is oft interred etc.)
       
      * The fact that the most influential people in the media are all in the earnings bracket that would see them affected by higher rate tax increases must, at least in part, explain why this myth lives on.

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      • Brian Hughes

        NB a failure isn't necessarily the same thing as a mistake. The architects of New Labour are far more politically astute than I am and may have correctly judged that electoral success around the turn of the century was impossible on a non tax cutting platform.
         
        But time marches on, perhaps it's time that the western world's populations grew up.  Live now, pay later only really works if later never comes…

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      • bert

        Brian, imposing higher rates of income tax for most sane people is electoral suicide. Considering Blair won three general elections (I know you guys didn't really like him), I would at least give him the credit of knowing how Middle England works considerably better than you do.
        As I keep saying to Hopi (and I reckon deep in his heart he agrees with me), it doesn't really matter what Labour concocts. The good folk of Middle England will not vote for an atheist and a man who used his marriage as a cynical publicity stunt.
        One more thing – how many of you Labour guys here know anything about firstly, private employment, and secondly, running a business where prudence is a necessity, not a convoluted political theory. You guys make me laugh, you really do.

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    • Paul Newman

      You see  wha your commentors are saying Hopi , " We got it right . we will do it again , in fact we would like to spart spending now "

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      • hopkin

        Basically, yes. I admit it's a hard sell, because most voters don't understand much about government budgets, taxation, and business cycles. But the point is that unless Labour try to explain why higher spending now would be good, and why higher taxes are necessary if you want better public services, than all Labour can ever do is a slightly more progressive version of what Conservatives propose.
        If you're interested in the facts about spending, check out the OECD factbook: http://dx.doi.org/10.1787/826282384058
        There you will see that spending was on average lower between 1997 and 2008 than it was between 1979-1997. I stop at 2008 because the size of the deficit after that is mostly down to the banking crisis. You will also see that the countries with the lowest deficits in the Europe have mostly higher public spending than we do. These are countries where taxation isn't a taboo. 

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  7. Paul Newman

    Brian  the IFS have concluded  that there was more room to obtain revenue form the  rich, further taxes would  have to come from the top half  who already pay almost all the tax. Otherwise   tax and spend is better than spend and spend , but not much. 

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  8. Paul Newman

    Of course, if you can point me to any pre-crash statement from a Conservative front-bencher that advocated lower spending
     
    Blue Canary do you  mind if I ask you how old you are ? I was just wondering if you had ever heard of a chap called Michael Howard  or an old so and so  called Oliver Letwin , used to be quite well known or about a thousand other Conservatives who spent their lives banging on about over spending  when no-one wanted to listen.
     
    I guess you are in your teens ? 

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    • Blue Canary

      Much older, but I'm very flattered.  As I said, send me a link to what they said and I'll review my position.

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  9. Blue Canary

    Interesting paper Hopi.  As I understand it, your arguments go something like this:
    1. The fundamental nature of the economic cycle means there will always be booms and busts.  During the good times we should ensure we save enough to help us get through the bad.
    2. This means that there will be times when we're not spending as much as we could to try and achieve social objectives, but this will be balanced out by not having to cut spending as much when times are tough.
    3. However, we need to get used to using non-fiscal mechanisms for achieving social objectives, because the amount of money available will never be enough (or indeed as much as we've got used to in the past).
    4. In the current situation we don't have the luxury of savings built during the boom years, so we are going to have to tighten our belts further than we would otherwise.  Until Labour publicly acknowledges this, and commits to being prudent in the future, they will remain unelectable.
    Not much in there that I would disagree with, and it seems a simple enough policy position to resonate with the wider population.  However I note that's not the universal reaction amongst other Labour bloggers.  So, I'm curious as to why you chose the term "fiscal conservatism" as opposed to say something like "balanced budget economics".  It's almost like you're deliberately trying to provoke the Left.

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    • hopisen

      Sorry not had more of a chance to respond to comments- especially the first, which quite rightly points out a flaw in the rule I suggested.

      Hopefully will be able to respond  in more detail soon

      On "why fiscal conservatism" part of it is because it's true and simple. Part a reminder to Labour that while labour people dislike the mention of the word conservatism many voters we need don't – and indeed has qualities that are valuable for the left. Finally because for the left to let the right own the most well known phrase for tight fiscal policy is unacceptable- others might prefer fiscal responsibilty or so on, but to my mind, that snacks of weasellingwhat is really meant. Might be right for an MP, but not for us lot.

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      • Blue Canary

        That seems to imply that you think the primary market for your message is the general public rather than other members of the Party.  I can see that this ultimately has to be the case, but it doesn't feel right at the current time.

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        • Paul Newman

          I wonder Hopi , how electible a Party would be , who were commited to fiscal realism and  thought the way to do it was with tax increases. 
          You are still weaselling really , spit it out man , you mean  CUTS , if you can`t say it you certainly can`t do it . I challenge you to spell it out 
          I HOPI SEN FAVOUR CUTS IN PUBLIC SPENDING…..
           
          You  wouldn`t dare  

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  10. resistor

    It's intended as the asking of a question, not the start of a faction.

    Typical New Labour, begin with a lie and keep on lying. This is a transparent B£airite campaign to undermine Ed Miliband, reminiscent of the SDP's tactics against Callaghan and Foot. How long before the split I wonder, when Labour are over 10 points ahead in the polls – just like last time?

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    • Hopi Sen

      Just wait. I'm trying to place an entire article about being (sort of) thin(er). I'm the new  Liz Jones., me.

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  11. David Boothroyd

    It is definitely true that the Labour Party suffers electorally if the electorate do not think it will be fiscally responsible (which I think is a more accurate description than fiscally conservative). The classic example was in the 1983 election when opinion polls showed that the voters Labour needed to win over were really concerned about unemployment and wanted the Government to do something. Labour kept stressing its plans to cut unemployment but the polls never budged. That was because the same voters did not believe that what Labour was planning to do would work.
    Dare I say that the Labour Party should steel itself to learn something from Philip Snowden?

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  12. RichardT

    "It is not true that Labour built the deficit – the financial crisis, which nobody in any party in the UK had predicted – accounts for the bulk of the current shortfall. "
    If you're going to argue that the deficit was modest  - prudent, if you like – as a % of GDP during the boom years, then you really have to acknowledge the nature of the boom. Specifically, that the rising tax take was founded on rising consumption (and 'investment' in a property bubble) in turn dependent on a colossal increase in personal debt, secured and otherwise. 
    Irrespective of sub-prime, it couldn't last. Plenty of people were saying this, forcefully and consistently. 

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