John Harris

Journalist & Author

The budget: if Osborne has no answers, who does? | John Harris

The interesting question is not what the chancellor will say on Wednesday, but whether Ed Balls dares set out his alternative

A statement of the blindingly obvious, to start. For all the talk of moves on childcare, fuel duty, infrastructure and the rest, Wednesday’s budget will surely fall far short of what the moment actually demands. This critique will be heard from both left and right: the Tories’ opponents will repeat those well-worn lines about austerity being the road to disaster and the likelihood of triple dip; and from the Tories’ own ranks will come the kind of turbo-Thatcherite arguments recently heard from David Davis, who says the budget must be “politically bold, economically effective and psychologically inspiring”. Good luck with that.

Beyond the Treasury, though, things are clearly on the move. By 2015, the government will probably have borrowed about £200bn more than it forecast, and the case for unrelenting austerity is weakening by the day. Among those now suggesting modest deficit spending are the British Chambers of Commerce, the Economist magazine, the multinational Bloomberg information service and, of course, the venerable Vince Cable, whose distance from most of his coalition colleagues seems to be increasing at speed. You never know: it may even soon be fashionable to talk about the lessons of the 1930s.

Much of this was captured in an under-reported moment last week, when Ed Balls appeared on Newsnight. If Labour were currently in power, Gavin Esler asked, would borrowing go up? “Well, of course it would go up in the short term,” said Balls, sparking a flurry of tweets from Tory insiders but little else. The muted reaction spoke volumes about where debate has arrived, and how busted austerity seems to be.

Balls and his team deserve credit for moving into territory that more hidebound Labour people must find rather uncomfortable. They now have a plausible set of alternatives to what he poetically calls “the economics of the lunatic farm“: a cut in VAT, the use of the windfall from the forthcoming 4G auction to build 100,000 new homes, the reintroduction of the 10p tax band and more. And as George Osborne’s problems deepen, there’s a sense of the gradual return of the stance Balls took in the so-called Bloomberg speech of 2010, when he asked very prescient questions (”Is it right to be cutting billions of pounds from public services and taking billions of pounds out of family budgets this financial year and next? What will that do to jobs and growth?”). He also argued that any large-scale cuts should materialise “only once growth is fully secured and over a markedly longer period than the government is currently planning”.

Yet something fundamental is still lacking. I was in Peterborough recently, and the mood of dejection was so strong as to feel contagious, crystallised by the obligatory empty shops, forlorn young people looking for dependable work that never comes, and the issue of immigration becoming more divisive than ever. In Newcastle, cuts to social security alone are about to suck an annual £83m out of the city’s economy. And in such blighted places as the south Wales valleys, communities are being laid waste. There are not even the merest green shoots there, nor will there be.

In that context, Labour’s prescriptions feel singularly underdeveloped. Insiders report a strong temptation to let the likes of Cable develop the anti-austerity agenda, so that shadow ministers can avoid taking any real risks. As with just about the entire political class, shadow ministers are prone to fixate on capital spending, but still apparently insist that current spending can take huge hits. This makes their take on the key coalition policies that are so destroying demand and shredding confidence seem conflicted, to say the least. “My starting point is, I am afraid, we are going to have keep all these cuts,” Balls said in early 2012, and that position does not seem to have much shifted.

Over the weekend, I spoke to a senior Labour figure whose diagnosis of his party’s big problem was simple enough: “We can’t explain our own argument … there’s a lack of full-throatedness.” He wanted the case against austerity put in terms of “a national mission”.

Ken Loach’s film The Spirit of ‘45 arrives just in time to stoke romantic ideas about what Labour might achieve if only it tried. But its story is bound up with the sole occasion when Labour has felt both confident and radical. As any student of British history could tell you, an equally strong indication of ingrained Labour traits lies in the party’s response to the crash of 1929, when Ramsay McDonald and Philip Snowden stuck to the orthodoxy of balanced budgets, and wound up cutting unemployment benefits and public sector pay. Such, perhaps, was a mindset which some Labour people still cannot shake: the habit of facing an increasingly discredited consensus, but meekly accepting it.

In the age of the focus group, moreover, Labour is paralysed by what people at the top call its “brand problem”: the fact that millions of people have come to associate it with profligacy and waste. Some of that is based in hard fact – but it’s also traceable to that weird interregnum after Gordon Brown had quit and the party fell into a summer-long leadership election. As a result, the coalition was free to implant its antediluvian economics in the public mind, and Labour was incapable of arguing back. Its big figures still live with the legacy of that period, and it sits in the midst of our politics like a dull headache.

The most pressing issue is not about the recent past, but the immediate future. Much as it feels strange to write, there’s a reasonable chance that in three years’ time, Labour might win – a prospect that opens up two possibilities. If you’re optimistic, you might assume that Balls and Ed Miliband would like to revive the logic of the Bloomberg speech. In that case one thing is obvious: they cannot take power and begin the rolling back of austerity without having had the argument in public, and amassing the requisite support. We’ve had one government without a mandate; even if it wanted to do the right thing, another would be a disaster.

And then there is the pessimistic option. If it carries on as it is, the party risks a national version of the tragedies currently being played out in Labour-controlled places all over the country, where councillors wail about Tory cuts and instigate them nonetheless. So 2015 is a date now fraught with danger: will it somehow mark the beginning of the end, or the same basic nightmare, unchanged but for the faces at the top? © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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