Labour Lose All Economic Credibility
Politicians are often accused of mincing their words, deflecting questions and using spin. Not so Labour MP, Ben Bradshaw, who – on storming out of a meeting with colleagues – described it as “a total f***ing shambles”.
Mr Bradshaw’s language may have been choice, but credit is due for speaking honestly and summing up the meeting so succinctly and, from what I gather, accurately.
At a meeting of Labour MPs last Monday, their Shadow Chancellor, John McDonnell MP, announced a U-turn regarding his party’s support for George Osborne’s Fiscal Charter – despite publicly supporting the policy only two weeks previously. The Charter requires the government to run a budget surplus – whereby money raised exceeds public spending – by 2019/20, after which the surplus must be sustained. This seems like a straightforward and sensible idea. Indeed, it is the sort of action we might encourage a friend in constant debt to take. However, unlike an individual or a household, a country’s economy is far more complex and delicately balanced. Whilst excessive national debt and deficit can never be viewed as the hallmarks of success, debt, in and of itself, is not necessarily bad.
In October 1929, America suffered the ‘Great Crash’ – which heralded the Great Depression. Already saddled with debt from the First World War and faced with 25% unemployment, the situation was dire. However, instead of tightening the country’s belt, President Roosevelt embarked upon the New Deal. This unprecedented programme of government action initially saw national debt more than double. It also saw unemployment cut in half and funded the construction of schools, irrigation, courthouses, roads, hospitals and grand infrastructure projects like the Golden Gate Bridge. This action was bold, decisive and proved to be the necessary tonic for America’s economic woes.
The New Deal was by no means a fluke. Indeed, post-war Germany’s decision to prioritise rebuilding its factories was the beginning of the hi-tech economy dominating Europe today. War weary Britain sensibly established our NHS, even though national debt stood at 250% of national income. In essence, cutting back public spending during difficult times is a flawed and discredited policy, whilst targeted investment can and does reap rewards.
There are a multitude of areas where a meaningful injection of finance would create jobs, boost tax revenue and make the country more attractive to live, study, work and do business. Placing future governments in an economic straightjacket is short-sighted in the extreme.
Although Mr McDonnell eventually came to the correct decision, the seemingly flippant way in which policy is made and then cast aside is cause for concern and betrays a real lack of credibility. That Labour even flirted with the idea of supporting Mr Osborne is astonishing. What exactly went on during the ‘shambolic’ meeting, we may never know. However, the Labour supporting New Statesman magazine suggested that the U-turn was made, in part, not for economic reasons but to assist colleagues in Scotland who know the SNP has more credibility in opposing both austerity and a majority Tory Government.
Two days after this now infamous meeting, Labour embarrassed itself further when 21 of their MPs refused to oppose the Fiscal Charter. Despite SNP opposition, the vote was carried.
Only months into this parliament, Labour’s leadership old and new has been incoherent disorganised and indecisive. With key votes ahead on all manner of crucial issues, including Trident renewal and new powers for Scotland, it is time for Labour to get their act together and join the SNP in standing up to the Tory Government.