Is it enough to not be the Tories?

This week's spending review is likely to unleash a nasty raft of cuts to government spending. The real effects of this will be felt over the next two to three years as services are gradually withdrawn. The mirror with Geoffrey Howe's deeply unpopular budget of 1981. Despite tax increases and public spending cuts being incredibly unpopular Labour failed to benefit because it wasn't focused on offering a feasible and credible alternative. What makes George Osbourne's spending cuts any different from those of Howe almost 20 years prior? Will an unpopular Tory government automatically propel Labour back into power in five years?

There are many arguments against the Tory plans:

• Osbourne's plans will hurt and I don't expect the cuts to be "fair". The botched cuts to child benefit recently announced show that many of the plans will be ill thought out. 
• The cuts are too hard and too fast not just from the Labour Party. This is my view. Taking so much money out of the economy will stall growth. It is also short-sighted to suggest that £1 spent by the government is £1 gone from the coffers. Much of that £1 will come back in VAT, corporation and income taxes. That won't happen now. Instead the economy will shrink, meaning recovery will become recession.
• The state's finances are not worse than expected. It is disingenuous of ministers like Vince Cable to claim that the current government finances are worse than expected. The state of the public finances are public and widely known. He is simply playing the fall guy for cuts and policies, such as tuition fees, that the Tories wanted to put in place anyway.
• The political problem for Labour is that the cuts will be blamed on the poor state of the nation's finances, which is Labour's fault, according to the Tories. That narrative will ignore the huge investment made to recapitalise the banks and in public spending to keep the economy going. Labour needs to respond that this was unavoidable. 

Significant though these are, none of these counter claims are sufficient for Labour to benefit from the Tories' unpopularity alone. Current polls show Labour edging into a small lead. To build on and sustain this, Labour needs to present a viable and credible alternative.  With a new leader that may take time, but having a leader at all is progress from the previous five months of an "empty chair." The quicker Ed Miliband can start setting out his alternative plan the better.

What does a credible alternative plan look like? It needs to show that both the deficit and growth are important. Cutting the deficit so fast could be a zero sum game, cancelling out growth that will itself increase tax receipts and reduce the deficit.

Labour's plan has to, and will, accept that the deficit needs to be tackled. It also needs to show that the better off would pay more than those in the middle and at the bottom. It needs to be fair and sensible.

If Labour's response is good enough perhaps David Cameron will start looking for a "popularity" war like the Falklands...oh, we can't afford one.

George Osborne: it was acceptable in the 80s

George Osbourne's speech today outlining the Tory economic plans should they win power suggests they are looking to reprise many of the economic policies of the 1980s. 


Specifically, the Tory plans to raise the private sector's share of the economy in all regions means only one thing: less government spending. Less government spending means fewer public services. While all parties agree that public borrowing (and spending) needs to be reigned in, it should not be ignored that public spending has helped reduce the impact of the recession. Cutting it severely and quickly could put the recovery back. 


The Conservative Party are recycling the rhetoric of the 1980s. Yet even then, a Thatcher government that regularly espoused a desire to cut public spending, failed to do so. David Blanchflower, Former member of the Bank of England's Monetary Policy Committee recently asked: "how exactly are the policies of the 1970s and 1980s relevant this time round...these are one-size-fits-all economic policies, and are out of place and out of time." Blanchflower later quotes Nobel Prize winning economists Paul Krugman and Joseph Stiglitz, neither of whom think public spending should be cut now. 


If the Tories really are serious about being a serious government, they will need some serious and credible policies. Osbourne's speech today failed to deliver. Perhaps that is why the Tory poll lead has come down to seven points, pointing at a hung parliament? Many voters may have fallen out of love with Labour, but they are far from convinced by the Tories and their lack of ideas. 

Honesty on cuts or honesty on Tory motives?

I don't expect to but it would be good to hear something from the Tories this week admitting that Gordon Brown's fiscal stimulus was necessary to keep the economy going. They are more interested in highlighting the size of Britain's budget deficit. Cameron and Osbourne claim this is because honesty is needed about dealing with the deficit. I'd like to hear a little more honesty from the Tories about cutting public services. 

Osbourne didn't mention what he would do with increasing tax receipts as the economy begins to grow again. Alistair Darling intends to use these to reduce the budget deficit while protecting public services. The Tories are using the deficit as an excuse to make cuts to public spending. In both the 2001 and 2005 elections this was the predominant theme of their manifesto. 

What will George and Dave do when the economy picks up? Osbourne yesterday left the door open for make cuts to inheritance tax for the rich and mentioned that he wouldn't scrap the 50% top tax rate at the moment, leaving open the possibility of scrapping that in future. Cameron's Tories have been accused of being light on detail - they are now, at last, telling the public what they intend to do with government. Rather ominous gaps are still there and it will take a strong response from Labour to show the country why the Tories are wrong. Rachel Reeves at Progress agrees: "The banking crisis and recession will be used by the Tories to do what they always wanted to do. Cutting back the size of the state and then cutting taxes for the few."

George Osborne: necessary evil or nasty party incarnate?

George Osborne today made much play of telling the truth about the country's finances, while claiming that Labour are telling "lies" about it. All sides of the political spectrum agree that the government needs to start balancing the books as we head back into growth after global recession. Does Osborne's speech today set out the answers the country needs?

Public sector pay restraint is going to mean that again those working in the private sector will be able to benefit from a growing economy, while teachers and ordinary civil servants have to wait. Osborne has set the bar too low, with those earning more than £18k subjected to a pay freeze for one year. I doubt these workers will get much in year two from a Tory government. The economy needs public sector workers spending their money just like everyone else. I agree that high earners from the public purse should be subject to restraint, probably for longer than one year.

Tax credit and benefit cuts should be carefully targeted. Labour wants less people claiming incapacity benefit and more working. This needs to be balanced with jobs for the unemployed to go to. I'm unconvinced that Osborne's plan will deliver this part of the deal.

There is little in his speech about what to do with rising tax revenues as the economy recovers. Will these be used to pay for tax cuts or to keep public services running instead of cutting them?

There was plenty of detail from Osborne today. The Tories are setting out their agenda for government. I'm going to cast a very interested eye over the next set of opinion polls to see whether the public accept the Tories somewhat austere plans. My suspicion is that Cameron and Osborne would prefer cuts to taxes and services. This means we may be looking at the start of a very unpopular government.

Who are the progressives?

Osborne claims the Tories are. He claims that Labour does not want to reform public services. Are these the same public services that were in disarray in the mid 1990s? Where every winter people died on trolleys in our hospitals because the NHS didn't have the capacity to treat them? This doesn't happen any more. In 1997 the dominant association with the NHS was of waiting lists. These have all but been eradicated.

Labour has reformed public services by making them more effective. Re-building hospitals, slashing waiting lists and rebuilding every school in the country is an impressive record of Labour reform.