After IDS: some questions for Labour’s Parliamentarians

With the Tory Party apparently in meltdown following Ian Duncan Smith’s resignation, it’s easy to miss how the events of the past few days affect Labour too.  I’ve already blogged about how the terms of Duncan Smith’s resignation letter expose the cuts and austerity agenda as a matter of political choice, not economic necessity; the decision to ditch the controversial cuts in disability benefits only serves to reinforce that (although, as ever with George Osborne, it’ll be necessary to look at the small print).  Moreover, in terms of the Government’s own fiscal targets, it’s hard to find anyone who believes the forecast of a £13bn fiscal tightening in 2020, an election year; it’s the purest fantasy.  It’s increasingly obvious that the austerian project is sinking fast.

It’s important for Labour because – as the events since the 2015 election defeat show – there are many people within the Labour Party who appear to implicitly accept the austerian agenda.  They are more likely to be found in Parliament than in the Party as a whole, and can be loosely described as the group that subscribes to the Progress organisation.  They are the people who insisted that it was necessary not to oppose the Wefare Bill last year, who claimed that Labour lost because it was too left-wing and overspent in office, and who have argued that Labour must be tougher on welfare spending than the Tories.  They are, by and large, the people whose candidates crashed to defeat in last year’s Labour leadership election, and who have refused to serve as Shadow Ministers under Jeremy Corbyn, and, most recently, have been reported as setting up their own informal group to provide an alternative critique of Government economic policy.

The events of the past week beg a number of key questions for them.

First, will they now accept that austerity is a political, not an economic choice?  The simple fact is that the Duncan Smith resignation and the furore surrounding it demonstrate that the cuts agenda – especially insofar as it relates to cuts to disability benefits – is wholly ideological.  And the financial smoke and mirrors of the Budget clearly demonstrate the utter artificiality of the defict reduction targets – they’re just numbers, and, like that £13bn fiscal tighening, no more in many cases than a finger-in-the-air fantasy.  You cannot cut your way to debt reduction – that’s the central lesson of six years of Osbornomics. But as recently as last Summer many of them were refusing to vote against the Government’s Welfare Bill, arguing that further cuts were necessary.  Will they now accept that this view is both an acceptance of the Tory agenda on its own terms, and has been blown to pieces by the politics of the last seven days?

Second,will they now accept that the narrative that Labour overspent in office is just plain wrong?  The evidence is overwhelming, but among some Labour MPs the lesson seems not to have been learned.  But, just a reminder – Gordon Brown was the last Chancellor to pay down the National Debt, the crash of 2007-8 was not caused by Government spending but a bankers’ crash caused by private, not public debt; the last Labour Government spent a lower proportion of GDP than the Thatcher governments, until the bailouts; and the economy was beginning to recover when Labour left office in 2010.  Yes, Labour ran a deficit – much of which was accounted for by public sector investment in education and health, which made up for some of the private sector’s long term record of under-investment in the UK economy.

Third, will they now accept that cuts aimed at the most vulnerable are counter-productive as well as wrong.  For all the misery caused, there is no evidence that cuts in benefits increase employment and incentivise people to return to work.  Above all, you need to accept that the strivers versus shirkers agenda is not only wholly unevidenced, but that the clamp-down on benefits that your wing of the Labour Party has been so loath to oppose has caused untold misery to millions – including millions in work?  Before 2015, many people felt that Labour was much too free with rhetoric about using benefit cuts to get people back to work.  The simple fact is that a culture of making it harder to qualify for benefits does nothing to make work pay in an environment of falling real pay and casualisation.

Fourth, will they now accept that referring back to Tony Blair is simply fantasy politics?  Of course Blair and Brown achieved good things in office – especially around child poverty and investing in heatlh, education and Sure Start.  But there is a shadow side to Blairism too.  The Iraq War was founded on dishonesty, hubris, and a flagrant disrespect for international law.  New Labour operated a top-down, target-driven approach to public sector  delivery that ensured that the trees obstructed the wood.  And domestically, it’s important to understand that in some ways the core tenets of Cameron’s Toryism are simply the ideas of New Labour taken to their logical conclusion – on marketising the NHS, on academies, on tuition fees, on liberal interventionism that leaves countries in a far worse state than before.  But, most importantly, the situation has changed.  Blair and Brown – mostly, to be fair, the latter – were able to harness the increasing tax revenue from a booming economy to enact distributive measures.  With an economy that continues in deep crisis, with many people having suffered dramatic drops in income since 2010, and with increasing levels of employment based on low and falling pay, part-time work and insecurity, that option isn’t available. (Neither, as it happens, is the option of talking about aspiration in the way that some on the Labour right do – because in a situation where pay as a proportion of national income is falling, it simply becomes a rationale for inequality.  And, increasingly, the economic damage caused by growing inequality is becoming apparent).

Fifth, will they acknowledge that the most electorally successful wing of the Labour Party has governed a part of the UK with enviable success while consciously rejecting New Labour rhetoric – and without recourse to PFI or NHS marketisation or outsourcing, and without the heavy-handed tactics that caused the doctors’ strike in England? Has abolished prescription charges and mitigated university fees? Has retained EMA, has maintained both Sure Start and created Flying Start to support the most vulnerable families?  Has faced cuts to its Westminster grants by putting decent traditional Labour values first?  And has encouraged enormous quantities of inward investment, not least into its thriving and diverse capital city (where I am proud to live)?  That place is called Wales, and shows beyond a doubt that Labour in office can be radical and deliver.  You don’t have to sup Tory values with a short spoon to be electorally popular.

Sixth, will they – at last – accept that the current Labour leadership has the biggest mandate in the Party’s history, and one of the key reasons for that is that the Corbyn team offered a clear challenge to the economic philosophy that is now unravelling in front of our eyes?  Rather than walking away, as they did in the aftermath of Corbyn’s victory, will they accept that democratic verdict, and stop the talk of leadership challenges and alternative groupings within the party to develop economic policy – the kind of talk that is tearing the Tory apart just now?  The trouble with the malcontents within the PLP is that they lost the argument last summer, and their inability to acknowledge this looks like Westminster bubble arrogance.

And if they accept this, will they now get behind John McDonnell as shadow Chancellor and contribute to developing an economic narrative that is grounded, rigorous and supported by some of the world’s leading economists?  Part of the point of John McDonnell’s New Economics project is to demonstrate how distant the political debate has come from grounded economics.  John McDonnell has recently crafted a financial rule that, by acknowledging that the UK economy is operating in a place where reducing interest rates is no longer an option, provides a policy tool of a subtlety and rigour that wholly evaded Ed Balls before 2015.  Labour MPs are faced with a stark choice; rejoin the economic mainstream with John McDonnell and his advisory team, or continue to express an economic approach based on the assumption that the internal contradictions of Osbornomics can be dealt with by tinkering at the edges.

One of the profound ironies in all this is that if the Labour Parliamentarians do get behind John McDonnell, they would in fact be replicating one of Tony Blair’s key successes – that of defining the Labour Party as the upholder of economic competence in the face of a Tory government whose economic credentials had been trashed over ERM and which was riven by disagreement over Europe (in which, as it happens, Ian Duncan Smith was a key player).  After an omnishambles Budget and a split over Europe that is a leadership contest carried on by other means, the Tories have left the door open for Labour.  But Labour can only take advantage if those  MPs who have been reluctant to back the Leadership – who have fed talk of challenges  – come in behind the party mainstream and show willingness to undertake the heavy lifting of winning in 2020.

Quite simply, the time has come to bury the egos, and get behind the Labour leadership to deliver victory in 2020.  That’s the route to real progress.


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