Tuesday, 22 June 2010

Competing narratives on cuts

Today's Emergency Budget finally provides a crystal-clear indication of the dividing lines between our new coalition government and the opposition.

The £6bn worth of cuts announced by Chancellor George Osborne included ending Child Trust Funds, freezing Civil Service pay, shrinking consultancy and reductions in departmental grants to the regions, as well as to transport, business, education. A more detailed list of £2bn immediate cuts was announced at the end of last week.

All this is described by the tories as 'cutting wasteful spending'. And all of it comes from the the total governmental outlay which rose by 7% to over £620bn. In other words it is a total reduction of just 1%.

But Labour's leading figures are seizing on the government cuts agenda, with David Miliband claiming this smacks of LibDems' 'broken promises' to voters.

We shouldn't forget however that the race to be elected Labour leader continues apace and Labour's obvious strategy is to attempt to undermine the coalition and force an early general election by arguing LibDems are 'propping up' a Thatcherite regime.

It is also patently untrue - as far back as September 2009 at the LibDem conference Clegg was promising to cut any pledges made by Labour which were deemed unaffordable.

But as I've argued elsewhere, calls such as by Unite leader Derek Simpson for LibDems to 'rip up membership cards' is a hollow political calculation - the 1% variation is just tinkering at the fringes.

Conservatives needed to meet their election promise to attack the deficit and 'Labour profligacy', so some symbolic cuts were always bound to be pushed into the headlines to appease their voters - yet in doing so Osborne has accepted the general orthodoxy of the numismatists and numerologists at the Treasury.

In January Labour's then-Chancellor Alistair Darling announced measures to cut the budget by £82bn - this would include spending cuts of £38bn, tax-rises of £19bn and £25bn from economic growth (at an ambitious 3% per year). That's a spending cuts-to-tax rises ration of 2:1, which compares with George Osborne's declared intention to make this a 4:1 ratio.

Taking Osborne at his word he has simply found an extra £6bn savings which he intends to add to Labour's £38bn cuts (a total £44bn), while he seems to be pinning his hopes that smaller tax increases (ie £11bn) will allow the economy to grow further faster (perhaps even meeting the 3% prediction).

Whilst Labour is going all out to attack the cuts agenda spurred by the desire to clarify the terms of opposition, it is actually misleading the public debate about what their own intentions.

In the heightened world of electoral machinations there is a clear identification with Labour expanding the state to provide greater assistance, while tories are equally clearly tagged as rabidly-enthusiastic ideological cutters. I would state nothing more that the blindingly obvious that Labour has been encouraging this to take root in the public mind ever since way back when they first lost power in 1979.

Ever since the purse-strings began to be loosened in 1997-9 Labour has had a major programme of one-off capital investment (on replacing school buildings, new hospitals etc) funded through off-balance sheet debt such as PPP and PFI, but which always represented an easy budgetary measure to take as and when the squeeze came. So, just as the financial crisis struck within sight of the general election there was an obvious battle at the highest level over exactly how far they could get away with implementing their contingency plans without upsetting their election strategy. They always knew continuing debt-financed expenditure would come to an end, the question was when it would and how they would maintain the narrative they'd successfully entrenched.

In the end Labour has been undone by the ability of the LibDems to maintain sufficiently high number of seats to legitimise Cameron's expedient cuts which were on the cards whoever ended up occupying Downing Street - which is why we're seeing Labour launch vollleys of attacks against the smaller member of the coalition rather than the cuts themselves.

Meantime, the LibDems have gone silent on their own earlier agenda, accepting that the price of entering coalition is that some concessions to Conservative voting opinion needs to be seen to be made and £6bn is a relatively small price which will have little more than a marginal effect - especially as Labour opposition can't coalesce around the detail.

So what with the LibDems and their vaunted 'tax switch'? Can we expect Clegg and Cable to bide their time supporting incremental changes and then come out loudly as we approach the next election? Well, I for one would advise exactly that - there is no profit to be had in making headway right now only to see it clawed back again later. In particular defining oneself under attack by opponents does so on their terms and cedes any initiative gained to this point.

The idea of a 'tax switch' is almost certain to get lost in the mix as it is characterised by partisan opponents trying to score political points rather than promote policies their supporters can't stomach. Conservatives will sell the LibDem as completely supportive of their position, while Labour have already been trying to open up a breach between the leadership and the membership.

Instead LibDems need to keep their heads down and out of trouble to be seen as a pragmatic and cooperative moderating force on the good that the coalition does. Clegg & Co shouldn't discourage Labour from asserting the imprimatur because the roots of the Conservative right do and will forever remain ideological tax-cutters but Cameron would have to fail miserably for those more radical ideologues to grow in strength, and that simply isn't in the government's interest.

As much as it may hurt the pride of the junior coalition partner to be dismissed as a 'mini-me' by left-wingers among whom they've long sought votes, it is transparent gamesmanship, wide of the mark and can be safely ignored for as long as it remains untrue.

It's just sad that the episode is ramping the spin cycle of comment up another notch and the headlines are getting further and further away from the real story. Yet what more should we expect after such a closely-contended election?

No comments: