Con-Dem Coalition’s cuts and austerity measures 11.11.2010


Labour Briefing’s News & Views section begins with wide-ranging coverage of the Con-Dem Coalition’s cuts and austerity measures outlined in the Comprehensive Spending Review and other announcements.

Andrew Fisher, LEAP Co-ordinator, analyses the Comprehensive Spending Review.

Gordon Nardell (see below) calls for Labour to challenge the Coalition’s economic plans – not just defend the market.

Tony Benson examines the Coalition’s attack on the welfare state, and Richard Price looks at the divisions the attack on Child Benefit is having on the Tory Party. Simon Deville looks at the contradictions of Con-Dem policy on housing.

Ed Doveton and Andrew Coates report on anti-cuts campaigns in Kirklees and Suffolk respectively.

George Binette assesses what the Coalition is up to in local government.

Bryn Davies describes how the Coalition is using the Hutton Report as an excuse for a further cut in public sector pay – by attacking pensions.

John Stewart reports on the death of Jimmy Mubenga, who died while being deported, and Andrew Coates looks at the current unrest in France.

Here is Gordon Nardell’s article in full.
Keeping Balls in the air

Gordon Nardell, Dulwich & West Norwood CLP and LEAP, calls for Labour to challenge the Con-Dems’ economic plans – not just defend the market.

“Challenging the cuts consensus” was the title of the Labour conference fringe meeting. Someone, it seems, had at least read the cover page of the last set of the Left Economics Advisory Panel (LEAP) Red Papers. That someone might even have been Ed Balls, who was given star billing so he could make a bold pitch for the shadow Chancellorship. Sharing a platform with Ken Livingstone, Balls made an impassioned defence of public spending in a time of recession, stressing its role in maintaining consumer and private sector demand. Balls’ message – that cuts, and the deficit, could wait – was a calculated departure from Alastair Darling’s commitment to halving the deficit within four years. A week later it was all over. Alan Johnson was shadow chancellor and Labour’s front bench was firmly aligned with the Darling position.

From a political standpoint, the Labour leadership has seriously miscalculated. Spooked by the Tories’ taunts of “deficit denial”, they have added the economy to the myriad of issues – academies, NHS marketisation, Afghanistan – on which Labour has cuddled up so closely to the Tories that it has simply ceased to function as an effective opposition.

Balls’ appointment as shadow Home Secretary has conveniently neutered him as an economic critic. No doubt most of the parliamentary party, for the moment at least, will succumb to the usual gagging reflex of loyalty to the leadership’s position. As was clear from the succession of mealy-mouthed front bench responses to George Osborne’s vicious Comprehensive Spending Review (CSR), Labour has for now let the Tories off the hook.

That doesn’t mean the underlying debate goes away. Quite the contrary: rival narratives on the crisis in public finance – its causes and the correct response – now represent the major faultline in political economy throughout the developed world. The CSR coincides with waves of industrial action against austerity measures in France and elsewhere. In the US, the war of words between fiscal fundamentalists and proponents of further stimulus measures grows ever shriller, with Harvard right winger Niall Ferguson raising the stakes by declaring the deficit an issue of “national security”. The run-up to the 2012 London mayoral election is set to become an intriguing counterpoint between a Tory incumbent who – up to a point – recognises that his party has yet to win the public argument on cuts and a Labour candidate whose instinct will be to attack his opponent from the economic left.

Against that background, the Balls v. Darling spat seems rather superficial. Both positions are really slightly different takes on the common assumption – shared with the Coalition – that the public sector deficit is a source of economic danger. The deficit has to be controlled by measures that, in whatever precise mix, sooner or later include deep cuts in jobs and services. Completely lacking from the debate is any fundamental discussion of principle on the causes of the crisis, the lessons to be drawn from it and who should shoulder the fiscal consequences.

The reason for the lack of real analysis isn’t hard to find. Central to nearly all arguments about the need to tackle the deficit is the response of the bond and currency markets. The greater a state’s accumulated debt, the higher the interest rate sought by the bond markets and the greater its currency’s vulnerability to speculative attacks. All this is quite correct, in the sense of a (broadly) accurate description of how markets behave.

However, markets are hardly elected or accountable bodies. Why should it be a problem for democratic states to take steps to alter their behaviour – or even replace them with something else – rather than meekly accept their diktat? The point is that any attempt at more than superficial examination of the deficit issue inevitably raises fundamental questions about market economics and whether there might not be a better alternative. These are questions that few in the (former) New Labour camp are enthusiastic to ask – hence the lack of choice in the Balls-Darling debate over cuts now or cuts later.

In one sense at least, Labour can no longer insulate itself entirely from these issues. Several socialists were successful in this year’s one member, one vote elections to Labour’s National Policy Forum – though not, sadly, in London where divisive tactics by some on the soft left resulted in wins for the right. In the wake of the CSR, Labour’s front bench will face regular reminders of the need to ask serious questions about the economics of public finance. If Alan Johnson cares to read beyond the cover page of LEAP’s Red Papers, he might even find a few answers.

*The LEAP Red Papers, and more economic debate, can be found on http://leap-lrc.blogspot.com.

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