Miliband’s Dilemma

Miliband’s Dilemma 

By Bryan Gould, first published here, and reproduced with kind permission.

Andrew Rawnsley in last Sunday’s Observer identified, quite correctly, the dilemma facing Labour.  On the one hand, the economic arguments indicate more and more strongly that George Osborne has got it wrong and that a new approach is needed; but on the other hand, the political reality is that the voters continue to believe that tough measures are needed and that the Tories are best able to deliver them.

The dilemma is all too familiar.  The left has always struggled to move the economic policy debate beyond the constraints imposed by right-wing orthodoxy.  And they have never grappled with the fact that the proposed remedy – that they must conduct the debate as framed by their opponents – means that the dilemma can never be resolved.

The current dilemma illustrates this well.  The Tory insistence that austerity and cuts are the only issue that matters has convinced a large part of the electorate that any alternative that fails to address this goal cannot be supported.  But a Labour readiness to show, for the sake of credibility, that they too are ready to inflict pain will multiply rather than solve their problems.

The acceptance of the Tory analysis would saddle Labour with immediate and multiple disadvantages.   Any criticism of Tory strategy is straightaway rendered ineffectual, because they are reduced to attacking the outcomes rather than the analysis and its conclusions; and if they are then challenged to explain how, in the context of the same analysis, they would produce different outcomes, they have no answer.

Furthermore, posing as ersatz Tories, committed to making the same “tough choices” but doing so with a sympathetic and regretful expression, is unlikely to persuade voters that they would not be better off with the real thing.  And the Tories will in any case, as Andrew Rawnsley points out, play it both ways by casting doubt on the genuineness and reliability of Labour’s commitment.

So, is there no option other than a capitulation that not only jeopardises Labour’s electoral appeal but also – and more importantly – denies the economy the measures that it really needs?

My own political experience leads me to recommend a quite different strategy.  It would require courage and hard work, but the benefits to Labour’s electoral chances and to the country’s economic prospects would be immense.

The starting point would require no dramatic rejection of the prevailing public perception of what is required from economic policy.  It would accept that a reduction of the government’s deficit is highly desirable, and that vigilance must be exercised in ensuring value for money in public spending, though it would point out that the government’s strategy has meant continuing cuts that seem only to make matters worse.

It would go on to argue that there are much more effective ways of tackling the deficit, provided that it is no longer treated in isolation but is seen as a part of the overall economic picture – because it is, in many respects, a symptom rather than a cause of our wider and more deep-seated problems.

Those wider problems – of lost competitiveness, of inadequate liquidity, of a weakened productive base, of high unemployment – will not be resolved by ignoring them (as the Tories are doing), or by weakening the economy still more by further cuts.  On the other hand, if we address them constructively, a stronger and more buoyant economy will not only raise employment, investment and living standards, but will in the course of doing so resolve the deficit problem as well.

There will be many who will quail at the prospect of trying to sell such an approach to a sceptical electorate.  But there are good reasons to take courage.

First, we don’t have to win the argument tomorrow.  We could expect an immediate barrage of criticism but we have until election day to build understanding and support for what we propose.

I recall, in the run-up to the 1992 election, the differing fortunes of two different Labour policy initiatives.  The tax policies were held back until the election campaign and were a disaster because, with so little time to get them across, they were easily misrepresented. I released our alternative to the poll tax, on the other hand, (on which subject we had been constantly challenged by the Tories) well before the election, and it was widely accepted by the time polling day came.

This time, we have the further advantage of being able to work with a significant and continuing shift in expert opinion.  From the incoming governor of the Bank of England to leading monetary economists, there is a renewed interest in a different approach. And the successful experience with that approach of leading economies overseas will also strengthen our case.

These factors may not impact immediately on public opinion but -with hard work on our part – will help enormously to force the Tories to join the debate on our terms.

Yes, the dilemma is not just economic but inevitably political as well.  That means we can end it only through political action.  Isn’t that what politicians are for – to build support for what they believe is right?

Bryan Gould

1 July 2013

10 thoughts on “Miliband’s Dilemma

  1. The State’s annual expenditure must be cut by £150-£200 billion pa in order to end the deficit and clear the National Debt.

    It then needs to be maintained at that sum (roughly £425 billion pa) for the next 30-50 years, allowing inflation to reduce it as a percentage of our GDP still further.

    The obvious place to start is by ending State involvement in much of our lives and the second must be raising the pension age to ‘average life expectancy at birth – 5yrs’ – or roughly 80 yrs now.

    That’s not by 2100, 2050 or some other distant date, but beginning in 2020, with a 10% draw-down on a tax-exempt pension of min wage (ie £13,000 pa) every year over 70. I’m open to consideration of 20% over 5 years, but would need the Treasury to work out the nett cost of that.

    After that, we can move into areas which actually affect day-to-day lives – like privatising all our roads, NHS and schools (good work being done there already) so that we have almost no State provision of anything apart from justice and defence.

    An end to Social Democracy, in fact, which, together with The Welfare State, has bankrupted not just the nation, but politics too: too easy to bribe a housewife with yet more hand-outs which destroyed our economy ever since women got the vote – and politicians started to bribe them with their children’s future tax income.

    Sad really – the unintended consequence of woman’s suffrage was Bankrupt Britain, just as the unintended (?) consequence of feminism and Equality was to make women into wage-slaves and dependent on the State to care for their own husbands, children – and parents.

    How sad.

    How utterly predictable when social Darwinism is frustrated by socialists.

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    • I would like to assume that you are being satirical. To take but one erroneous assumption.. the UK can never run out of money or be bankrupt. Do you wish me to find the confirming quote from that well-known socialist, the former governor of the Bank of England, Mervyn King? And to whom exactly do you think we should repay the national debt? Btw are you an Anarcho-capitalist straight out of CCHQ or are you trolling?

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      • Current cost of interest on the National Debt = £48 billion
        Cost of National Debt by (say) 2020, when interest rates return to normal (5%) levels = £150 billion.

        That’s not affordable, under any circumstances you might postulate – no combination of taxes and GDP/population growth covers it.

        Yes, the UK could default.

        Yes the UK could have inflation at 10% for a decade or more (ie current policy) but the ‘Austrian School’ of economics approach is to cut spending (David Laws (averred socialist) says the maximum sustainable level of State spending is 33.33% of GDP; given his politics, that means 25% is the reality: we’ve just, as a nation, completely lost sight of what is affordable.

        So, since teh biggest single item in State spending is benefits, specifically pensions, it follows hat the State Pension age has to be returned to its 1906 level – 70 + that necessary to allow for the increase in life-expectancy since then. The IES did that calculation recently – it made State Pension Age today would be ………

        113 yrs and 5 months.

        So raising it to 80 is eminently sensible (asap) and thereafter pegged to Average Life Expectancy at birth – X years (I’d suggest 5, but 3 would be acceptable).

        The idea that you can retire and live at taxpayer’s expense for 30-40 years (as a woman retiring at 60 could do until recently) having paid few, if any, NI contributions during her lifetime, is plain insanity.

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      • You appear not to have read my last reply. The UK issues its own currency. It cannot default, and you have not answered my question about to whom, are we to repay the national debt? Until you address the fundamentals, there is little point in discussing the supposed issue of hyperinflation, or the more likely deflation, resulting from Osborne’s economy wrecking policies.

        Btw when have the austrians ever called it correctly?

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      • Don’t be stupid, really, really, REALLY stupid!
        Greece, Spain, Italy, Portugal, Malta all defaulted and had to be bailed out by Germany – ditto the UK in 1976 when the IMF stepped in.

        The UK’s debt is owed to banks & myriad financial institutions and pension funds and foreign countries (mainly Middle East and Oriental/Asian).

        In the event that we no longer had the £££ to repay debts when they matured – and/or meet the next tranche of interest payments when they became due – then our creditors would themselves either go bust (2008 would look like a piggy-bank problem) or demand usurious interest rates to ‘roll-over’ the debts: private pensions, for example, could no longer be paid in many cases, so this is not a dry academic point but a serious one affecting everyone in the UK.

        And State employees and State pensions would not be paid – ‘there is no more money left’.

        I agree that QE has staved off deflation (sadly), merely deferring inflation by a decade or so – we’ll shortly owe £1.4 trn and (allowing for public sector debt liabilities) nearer £4 trn.

        The entire Ponsie scheme that is the public sector pension liability (State, public employee, Quango etc) is completely and utterly unsustainable in a world of declining population and declining wages and hence the raising of the pension age by a decade or more is clearly going to happen – politicians are just s**t scared of telling us just how bad things really are: oddly, the handful who have at least raised the subject are those most respected…

        oh – and the Austrian School has proved (broadly) correct whilst Keynsian economics has proved, invariably, laughably wrong – at least as politicians have used it.

        Had we begun the 2007/8 financial mess with £1 trn in national credit, we could have spent it over the last 5 yrs and then built up a surplus of (at least) that size over the next economic cycle – but politicians (esp brown) merely spent, spent, spent, so the current £1-2 trn of ‘fiscal stimulus’ (2001-2020?) has merely created an unaffordable and unrepayable mountain of debt.

        Britain is bust, and has been indubitably bust, since the 2001 + loose spending of Brown’s incompetency in Govt made the interest payments we (even currently) meet unaffordable.

        For £50 billion pa you could abolish a whole raft of taxes – or double expenditure on Defence!

        Now, what could we do with the £150 billion pa that it’s going to cost us in 2020?

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      • I will repeat for the last time.. the UK issues its own currency. We can never default or be made bankrupt… unlike Greece, Spain, Italy, Portugal, Malta etc who use a foreign currency, the Euro. There is no comparison to be drawn.

        I’m afraid that you also misunderstand the nature of the national debt and doubtless the deficit too… not to mention Gordon Brown’s spending. Are you aware that there was a global banking crisis? No don’t answer that.. its clear that further discussion is futile.

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      • Zimbabwe, Argentina and the Weimar republic all had their own currencies – all had hyper-inflation and were (effectively) bankrupt.
        The similarities between 1932 and today are striking.

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