Party heads have to be knocked together and a new centre-left philosophy created
This is an administration of U-turns and another one is approaching. The scale, severity and irrationality of the deficit reduction programme makes the policy unsustainable. The economy is already taking a fearful hit and there is worse in store. Consumer and business confidence are at a low ebb. Business investment is falling precipitately. The construction industry, a traditional source of Tory support, is seeing its order books evaporate. Forecasters are lowering estimates for growth in this year and next. A prolonged period of very low growth is in prospect. The austerity prospectus, sold by the coalition as the necessary act to save us from national bankruptcy and launch recovery ? always complete nonsense ? is not working .
There has been a sustained and ferocious debate inside the coalition, and in particular the Treasury and Number 10, ever since the beginning of the year about how to deliver more growth. The vote on AV was defeated as Tory high command always planned; it was only the second leg of a much more important constitutional change ? to create 600 new constituency boundaries at the next general election with all Labour bias removed. But to win an overall majority in 2015 or before, the Conservatives now need two last things to seal what should be a certain deal ? no anguished debate about undermining the NHS and unambiguous evidence that the economy is on the mend and living standards are rising.
George Osborne's calculation was that the combination of dramatic early austerity, very low interest rates, subsequent recovery and pre-election tax cuts as rewards would do the trick. He genuinely believed the free market, sound housekeeping story. Now he is not so sure. He is discovering, as Bank of England chief economist, Spencer Dale, recently acknowledged, that the government knows a great deal less about how the economy works than it thought.
The OECD could never have written its report raising questions about the government's strategy without Treasury clearance. Its argument that there had to be more flexibility in the way the deficit reduction programme is implemented, reflecting the condition of the real economy, reflects the way the internal argument is going. Gus O'Donnell, the cabinet secretary, is on record as urging a plan B. The Lib Dems have been given the wink that they should not desert the ship; there will be some give on fiscal policy and on the NHS. Increasingly, the only question is in what form and how it is to be sold.
Labour should not underestimate the coalition partners. They are very good politicians, and while these Conservatives are anti-state zealots, above all they want to stay in power. Yes, there are some stupid, supremely ideological Tories and Tory supporters, some of whom festoon the opinion pages of Britain's right-of-centre press, but the leadership of the party is more willing to duck and dive as events unfold. It is obvious that British capitalism is dysfunctional and urgently needs reshaping around new priorities. George Osborne can read the runes too and wants change; indeed, that was at the core of his budget, even if the means fell woefully short of the desired end. But Osborne has no interest in ideological purity and failure: winning is more important. Stand by for a plan B.
All this presents the Labour opposition with a profound challenge. Shadow chancellor Ed Balls holds the position that the severity of the current deficit reduction programme is economically wrong and when some of the capital spending cuts are restored and other stimulus measures introduced he will have a joyful few days saying that he has been proved right ? but what then? The coalition will have very much increased the chances of economic success and if it can avoid overtly damaging the NHS ? not easy given the Lansley reforms ? set itself up for election victory.
A cleverer, more flexible fiscal policy will certainly help the economy, but the dysfunctionality of British capitalism requires more deep-seated change than the coalition is proposing. It does not understand how to make bad British capitalism good; it is too in thrall to the interests, notably in finance, that it needs to challenge and has no compelling plan for the future.
Labour has to start saying so and set out a vision for a better capitalism. It is not enough to say what Labour is against: the coalition is more than capable of removing its lines of negative attack. Many of Ed Miliband's critics on his own side are muttering that he is not making the impact he should. But where, pray, is the philosophy and programme that should inform the leader of the Labour party? One man cannot solve the problems of an entire political movement.
And they are profound. The party has no clear philosophical and political spine. Clause 4 socialism is stone dead. Nobody in wider British society believes in the socialisation of the commanding heights of the economy or nationalising the banking system, even if there is a powerful case for bank break-up and tougher regulation. Privileging trade unions and their rights is no less yesterday's position unless and until trade unionism reinvents itself. Equally, the Blair/Brown vacuity of being uncritically pro-business makes no sense when it so obviously needs reshaping. Yet the Labour party still constitutes all three strands, none of whose ideas could make any plausible platform for government. Their heads have to be knocked together and a new centre-left philosophy created.
This is the Labour leader's task. But the outlook is not entirely gloomy. He has successfully lost the Red Ed tag. Leading centre-left figures such as Jon Cruddas and Maurice Glasman, father of Blue Labour, are managing to talk about the inequities and dysfunctionalities of British capitalism without having to follow through by saying that socialisation is the answer. Richard Lambert, the former director general of the CBI, made a tough attack on City short-termism last week. All this helps open up the political space Miliband needs if he is to argue for a good capitalism. A cluster of sound thinktanks ? the Resolution Foundation, the IPPR and Compass ? is embarking on some refreshing new thinking.
But the process is too stately. Events are moving quickly. Labour has to set out a persuasive and distinctive position on the big questions ? finance, ownership, corporate governance, social investment, innovation, infrastructure, workplace reform, living standards ? and to do so within a new centre-left philosophy that remakes and rebrands the Labour party. The next 18 months will be when the next election is won or lost. Miliband, his shadow cabinet and his party have to start to dare. Their opponents take risks. So must Labour.
Source: http://www.guardian.co.uk/commentisfree/2011/may/29/will-hutton-labour-needs-rebranding
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