We’re experiencing a very traumatic rebirth. Labour is broadly in the right place on the issue. Tories are at the wrong end of ten years of austerity, and are the midwife of this traumatic process. In 2022 the big question will be; now that we stand in front of the future, looking at the tabula-rasa before us, what kind of society do we want to be?
What makes Renew Labour any different from the New Labour that failed in 2010 and 2015?
The answer is that the magic money tree has no sway any more after the General ELection of 2017:
New Labour came to power within the thatcherite consensus, and could not promise to tax significantly more on all of us in order that the government could achieve a lot more in the way of public good. No, locked within that consensus they instead promised to tax a little more on other people, and that somehow they would still achieve significantly more public good.
If there is an argument to be made against New Labour’s management of the economy it is that there is always an economic cycle, whether it runs for five years, tens years, or longer. The correct response is to judge the height of the boom and begin to reign in the growth in spending, so that when tax revenues dry up the public finances aren’t left servicing spending commitments it could not meet. And thus the argument that Labour did not obey the requirements of that cycle past 2005. When they got in in 1997 they received an economy on a rising tide, with the public finances in good order; high growth, growing tax receipts, practically no deficit, and low debt. When told of his good fortune, brown famously told the treasury official; “what do you want me to do, send them a f%&kin* thank you note!” Now, in order to get Labour trusted with the economy prior to 1997 brown came up with his famous golden rule: broadly, that gov’t spending would not rise faster than tax receipts, so the proportion of the economy taxed for public spending would remain stable (at ~37% of GDP). This was fine, with booming growth he could effectively spend more and more money, for free. Where Labour got into trouble was after 2002, when internal pressure to do more public good got the better of the golden rule. Remember the cycle. What he did, was to continue to forecast storming economic growth in the years ahead, allowing him to boost spending today, because spending would in theory remain flat as a proportion in the years following… Famously, he claimed to have ended boom & bust cycle, the macro-economic cycle in effect. A bold claim, but Labour merrily marched on building an ever more intricate web of welfare spending, in addition to boosting spending on public services. Alas, the cycle ended with the crash in 2007. By which point, public spending had grown in nominal terms to ~43% of GDP and there was a yawning chasm of ~5% of GDP that could only be met with deficit borrowing. So, the public debt began to grow, and at quite a pace, since the shortfall was about £100b annually. This is where we all wish Gordon had stuck to the spirit of his golden rule, and not just the letter. Now, this is a difficult thing for anyone to judge because if picking the height of the boom was easy we’d all be rich men. Made all the harder because macro-economic policy takes roughly five years to have a deep and sustained impact on the economy. And when the bust arrived, he couldn’t just cut public services, and slash welfare because that would strip (artificial) demand out of the economy further damaging the tax base that he needed to preserve to keep the plates spinning. There is no free lunch here, because an extra 5% of GDP probably takes 0.5% off the annual growth for every year it exists, and of course the debt interest is now over 1/3 of the total NHS budget. Year after year. But there we are, the golden rule proved to be a little to flexible, and his party a little too demanding in expecting him to flex it.
Needless to say, this is now a socially unacceptable way to manage an economy, and thus politically unsaleable.
But this is not what Jeremy offered. Gone is the magic money tree of the New Labour years. Instead, he campaigned to take a lot more in tax, so that he could do a lot more public good. A more collective view of society, and a more enabling view of government as an agent of that collective will.
Yes, some of us might not see that as the society we want. Others will have doubts whether his proposed tax rises will generate the revenue he claims. Others still, might question whether his proposed use for that tax money is represents a sensible prioritisation of limited resources.
But, he will be offering to write a contract for a kinder and more collective society on that tabula-rasa, and that will be attractive to a ‘war weary’ electorate in search of healing.
Even the if the tories hold a government together for the five years of brexit negotiations, and even if they are deemed to be a success, they will have a steep mountain to climb to win in 2022.