Fiscal Credibility

by georgemadddocks

Harry Langford recently allowed us to repost a article from his blog, in it he raised a crucial issue for Labour –

Fiscal credibility, in an age of no money for the Left to spend will be more important than ever.”

The initial stages of Ed Miliband’s leadership were an opportunity to make a fresh start and recover from the damage done to our economic credibility by Gordon Brown. This didn’t happen: Milibands initial refusal to work in bold, media friendly terms was a mistake, Alan Johnson’s time as shadow chancellor was a disaster and finally the refusal to apologise for the Brown governments mistakes was foolish. The culmination of all of these mistakes is that Labour now has no economic credibility and the Conservatives have been allowed to establish their economic narrative.

The Conservative economic narrative is roughly as follows; Labours mis-management of the economy has led to a untenable deficit, and only the Conservative spending cuts have stopped the financial markets losing confidence in the UK and a subsequent (Greek-style) crisis. This is nonsense.

 There was barely a cigarette paper between Conservative and Labour economic policies before 2008 and we are not, and never were, at risk of losing market confidence – the difference between Labour and Conservative proposed spending cuts before the 2010 election was 0.6% of GPD, market confidence was, and is, a non-issue. As Martin Wolf put it: “We are terrified of a confidence bogey who is asleep.”.

Now 0.5% growth and rising unemployment confirms an economy stagnating as the private sector fails to pickup growth – exactly the problems Ed Balls predicted George Osbourne’s economic measures would create. Despite this only 35% of the electorate trust us with the economy. Labours fiscal credibility is far worse than it should be, this is Labours fault, and we are still making the mistakes that have led to this situation.

As affirmed Brownites Ed Balls and Ed Miliband took their respective offices with immediate credibility problems. They have further exacerbated these by attempting to be radical before they are seen as competent. It is pointless to try and attack the bankers before voters see you as economically competent. Similarly, you won’t restore your economic credibility by praising the well meaning loons of the Occupy movement and trying to create a ‘new capitalism’. Yes, the City took us for a lot of money and is not disposed to give it back – but when you are the protege of a man who is believed (wrongly but comprehensively) to have trashed our economy how likely is it that the public will give you a mandate to rethink the economic system that has run the country for the last thirty years?

The Right Left is designed not to be about analysis, it is about action. I would welcome readers opinions on the following:

Until they have a reasonable degree of economic credibility Labour must not attack the City or support Occupy or similar groups, absolutely minimal (public) trade union support also seems prudent if not essential.

Five points are four more than people with a family/job/life have time to take in, Labour needs to simplify its economic message, the Tories message about the deficit works because it is simple and can be related to a households income we must establish the same simplicity in our message.

The public believe the deficit is ruining the economy, theres no sense trying to correct this assumption without economic credibility so: Labour must constantly reiterate that it is prepared to cut the deficit as fast as the Conservatives.

Labour needs to adopt the entirety of the centre ground of economic opinion, so any poicies that aren’t anathema but might promote growth we must take as our own. Osbourne is already moving to “plan A+” and starting to change course we must be able to portray this retreat as a vindication of our economic policies.

The stagnation of the UK economy must be rebranded as a crisis, rather than just a problem. Currently the economic stakes are not high enough, this is partly because with the apocalyptic situation happening across the EU we seem healthy by comparison. Labour needs to reframe the UK’s economic situation within pressing urgent terms.

We have been making economic mistakes for far too long, and have done a lot of damage to our reputation. As we frame the UK economic stagnation as a crisis we must not underestimate the crisis the Labour party faces:

“Jon Sopel: Well it’s not just the government spin is it? I mean Standard and Poor’s one of the world’s leading credit agencies have said that – issued a pretty clear warning – that ‘our triple A rating could come under downward pressure if the coalition’s commitment to fiscal consolidation falters.’

Ed Balls: Well look, we have to get into a debate here about whether the credit agencies lead the debate or follow.”

Again, theres no real worry the markets will lose confidence in us, and the credit agencies are the political wing of the financial markets – Ball’s is not entirely wrong in diagnosis. But less than 35% of the electorate trust us to run the economy. In these circumstances suggesting that a Labour government would dictate the terms of the credit debate just looks like implausible politics and bad economics, it also looks, and is, fatally arrogant.

We win no votes behaving like this and we do not have votes to loose, we must do better, and soon.