What is happening to the team of economic advisers that Labour established after Jeremy Corbyn’s leadership election win last year? The answer is that many members of that team are increasingly dissatisfied with the Labour leadership’s response to their work and in some cases are now backing Owen Smith in the present leadership election.
It’s important because a large part of the rationale for voting for Corbyn last summer is that he was the only leadership candidate who was prepared to oppose the austerity consensus and ask the fundamental questions about an economic policy based on cutting public expenditure to meet ever more elusive deficit reduction targets. As I wrote at the time, Corbyn may not have had all the answers but was, at least, asking the right questions. The appointment of an economic advisory committee made up of eminent economists who had challenged the austerity myth was a hugely important step; Labour’s economic message in 2015 was weak and confused and here was an opportunity to build a credible and popular anti-austerity message based on a clear, grounded economic policy.
It hasn’t happened. A huge amount of work has been done; meetings have been held around the UK, including a major conference in London at which the issues were aired. But nothing has come of it; the Labour leadership has not grasped the opportunity and the advisory committee is in disarray. It has met twice and has now been suspended, and key members are now voicing their frustration.
It started with Richard Murphy voicing his criticism on his Tax Research blog. On 17 July he wrote:
There was no policy direction, no messaging, no direction, no co-ordination, no nothing. Shadow ministers appeared to have been left with no direction as to what to do. It was shambolic. The leadership usually couldn’t even get a press release out on time to meet print media deadlines and then complained they got no coverage.
[…] critically, there was no vision. A team of economic advisers were set up, but never properly consulted, let alone listened to. Three enquiries, into the Treasury, Bank of England and HM Revenue & Customs were established and given far too long to report: none has as yet. I gather the tax report is in draft: I have not seen it. Whether it will be presented is anyone’s guess. The Bank of England study has collapsed with the departure of Danny Blanchflower. Of the Treasury report I haven’t a clue. The point is though that for coming on for a year now policy has been on hold for these reports and the world has moved on. That’s just not competent.
The same problem has been seen around Brexit and so many other issues. If Jeremy and John had known what they were doing these impasses would not have happened. The impression left is that they have created a movement that hates what’s happening in the world and can get really angry about it, but then has not a clue what to do about it.
In other words, a shambles defined by the inability of the Labour leadership to debate, let alone craft, a coherent policy position; to take the input of serious economists and to turn it into a political programme. But this, far more than organising rallies and indulging in internal party faction-fighting, is the absolute core of what political parties do in a democracy.
Meanwhile, Simon Wren-Lewis – a key member of the team who, crucially, did the macroeconomic work that demonstrated clearly that Labour did not overspend in office – has set out his views in a series of posts on his Mainly Macro blog. He is brutally explicit about the challenge for Labour:
My response is the same as any decent social scientist: show me the evidence that this is what you are doing. It seems to me what Corbyn has done is build an activist base made up in large part of mostly idealistic, mostly young political activists, and I think that is a great and valuable achievement. What terrifies MPs, and me, is if this base gets delusions of idealism and grandeur, and saddles them with a leader who will lead the party into electoral irrelevance. If you think those fears are wrong, show me your evidence. Not your hopes, but a concrete and realisable plan.What I see so far is largely a government that acts as if it was unopposed, or that provides its own internal opposition. The exceptions are generally not the result of Corbyn. Look at the first item in the list provided by Liam Young here: the abandonment of cuts to child credits. This was not the first major achievement of a new mass social democratic party, but of opposition from members of the House of Lords and the misgivings of some Conservative MPs. Iain Duncan Smith did not resign because of pressure from Labour!There is a contradiction here that Corbyn supporters fail to acknowledge. In the UK to have any chance of building a mass social democratic party you need a parliamentary party to provide a voice that will be heard. That means MPs on your side, not against you. The adoption of a sensible fiscal rule – another item on Liam Young’s list – was an example of that happening, but any attempt to repeat that now would result in just endless discussion of internal divisions.
The concern that most party members about Owen Smith is that, once elected, he will slip back into the disastrous form of right wing appeasement that led to Corbyn’s election last year. Smith’s support for Trident adds credence to that view. But there are important reasons why this may not happen.
The political landscape after the Brexit vote has changed substantially. May’s cabinet appointments effectively put the Brexit side in charge of negotiations. That might be clever politics by May as far as her position in the Conservative party is concerned, but it is bad for the UK. Smith can provide a convincing pro-Europe opposition to that, which has to include headlining the benefits of immigration. This position will be supported by most of UK business, which cannot trust the Brixiters with looking after its interests. Labour will no longer feel tempted to temper policies to avoid offending ‘business leaders’.
The other main area, besides immigration, where past Labour appeasement was so damaging was austerity. As I argued in the New Statesman, 2015 austerity – cutting public investment when interest rates are very low – has now been disowned by senior Conservatives. 2010 austerity – fiscal contraction rather than expansion in a recession where interest rates are at their lower bound – may still happen in a Brexit based recession. In these circumstances it is difficult to imagine that Smith would endorse this austerity, but he could confirm this by commiting to follow John McDonnell’s fiscal credibility rule.
Corbyn doesn’t seem to care about being a leader of an opposition party. He seems more interested in addressing crowds of supporters around the country. It doesn’t seem to matter to him – although it should – that three-quarters of his MPs, who doubt his leadership qualities, rightly passed an overwhelming vote of no confidence against him. He should have quit. He doesn’t have enough MPs who support him to be able to form a complete shadow cabinet. Incidentally, if there were even the slightest prospect that he could become prime minister, the bond and equity markets would eat him for lunch.
The May 2015 election wasn’t lost because Labour wasn’t left wing enough. It was simply unable to persuade the British people that it had a credible set of economic policies. Austerity was a disaster – it has led to the slowest recovery in 300 years and the biggest fall in real wages ever recorded. In my view, that is the main factor explaining the Brexit vote; people are hurting, but the hurt has little or nothing to do with EU regulations or immigration. Eastern European migrants, for example, pay much more into the public coffers than they take out. The overcrowding in the schools and the NHS arose because George Osborne as chancellor did not invest the people’s money in the services they were entitled to.
The message is very clear: key members of Labour’s advisory committee, the people at the core of Labour’s economic project, simply do not believe that a Corbyn-led Labour Party can win in 2020, and in some cases are talking about Labour being out of office for a generation. That, for the people that Labour claims to speak for, is a disaster, not an inconvenience; but the people who can least afford Labour to be irrelevant for a generation have no voice. That should be at the forefront of every Labour member’s mind when they cast their votes.