‘There but for the grace of…’ A couple of things Lib Dems should consider before joining the attacks on Ed Balls

by Stephen Tall on January 16, 2012

Tempting though the schadenfreude is, I think Lib Dems would be wise not to enjoy too much Labour’s discomfort at Ed Balls’ decision to declare Labour cannot promise to reverse any of the Coalition’s cuts.

I can of course entirely understand the urge to shout ‘Ha! Told you so’ at the shadow chancellor. In an interview for The Guardian published on Saturday, Mr Balls stated categorically:

“My starting point is, I am afraid, we are going to have keep all these cuts. There is a big squeeze happening on budgets across the piece. The squeeze on defence spending, for instance, is £15bn by 2015. We are going to have to start from that being the baseline. At this stage, we can make no commitments to reverse any of that, on spending or on tax. So I am being absolutely clear about that.”

The economy? It’s what you believe, stupid

For those Lib Dems who are daily having to defend the party against Labour’s condemnation of the Coalition’s policies, it is hard not to raise a cheer at this apparent climbdown. Of course, as Mr Balls’ defenders would be quick to point out, he is simply stating reality: with the UK economy faltering there is quite simply no public money to throw around. He and they would also argue that this is the Coalition’s fault: the Government cut “too hard, too fast” and is now paying the penalty.

As with many economic arguments, your interpretation of Mr Balls’ speech will turn less on the facts and more on your beliefs. If you think the deficit is the greater long-term threat to the UK’s prospects of economic growth you’ll trust the Coalition’s policies. If you think growth will be harmed by cutting the deficit too quickly you’ll be more inclined to Labour’s approach.

Coalition supporters will point to the fact that the UK has avoided the fate of many of our European neighbours, including now France, and has maintained its triple-A credit rating, keeping the cost of government borrowing low.

But, in the absence of a parallel universe, we have no way of knowing how the economy might have fared had the Coalition stuck to Labour’s plan only to halve the deficit within one parliament rather than to eliminate it. Would the UK have bucked the European trend? Or would we now be facing far more bitter-tasting austerity medicine?

No-one knows, or can ever know, for sure.

Why Labour’s economic narrative is failing

Over at his ‘thinking liberal’ blog, Matthew Green has a fantastic, must-read post analysing as neutrally as possible (despite the trenchant headline, ‘Ballsed up – Labour’s economic narrative implodes’) the perception of Labour’s economic narrative:

The angry brigade hears what it wants to from the “too far, too fast” mantra and thinks that the Labour front bench is on its side. But the Labour leaders also know that the economy has shrunk so much that many, indeed, most, of the cuts will have to be made eventually. Labour’s plans to cut the deficit before they left office weren’t so very different to the current government’s, and very little at all compared the surprisingly slow pace at which the deficit has actually been cut. Their plan is actually to win back and exercise power again, rather than simply have fun as an opposition party. …

But Labour have encountered a wider political problem. The passion and anger of their activists burns as bright ever, but the public are simply not convinced. Why? It is tempting to blame economic naivety, which allows the government and its supporters to present the government’s finances as if they were a household budget. Actually I think the feeling runs deep that the economic prosperity of the late Labour years was unsustainable. There is no naivety about that standpoint. Government debt catches the blame – but in fact it was private sector debt that was more to blame. And for those that did not have a government job, the suspicion the state was too big and benefits too generous ran deep. …

And so the two Eds have started to reach out to the sceptics by emphasising … that the cuts will have to stay. The hope is that this will then give them an opportunity to get a hearing for whatever else they have to say, on corporate greed, the NHS reforms and so on. But the activists are apoplectic. The Guardian‘s weekend article has attracted a whole host of disbelieving and hostile comments from a group of people that is now feeling disenfranchised.

But the narrative is too complex to be accepted by the sceptics either. Only a confession that the economy before 2008 and unsustainable, even without a financial crisis, will do that. Alas the two Ed’s don’t think they can say that. And so politically the narrative falls apart.

That all seems fair to me. And to be fair to both Eds, Balls and Miliband, I’m not sure how they can create a winning narrative given the still-dominant perception that the Coalition is clearing up Labour’s mess. Voters will gib at this or that cut, and would like to see more aggressive government action on top pay to make them feel like we genuinely are all it in together — but overall the current austerity is seen as an unpleasant necessity to be got over and done with as soon as possible, rather than stretched out.

But what of the Lib Dems’ own economic narrative?

So there are a few Lib Dems feeling relieved that the flak for facing up to economic reality is now being flung in Labour’s direction. But it’s worth considering the following two points:

1) We agreed with Labour’s spending plans in 2005

The Lib Dems were as signed-up as Labour to the government spending that saw the UK economy running an unsustainable deficit at a time of growth.

True, it can be argued that years of under-investment in public services required a correction. But the fact remains that we — along with the Conservatives (remember Messrs Cameron and Osborne’s “sharing the proceeds of growth” triangulating mantra? — were just as culpabale as Messrs Blair, Brown, Miliband and Balls in advocating policies which left the British economy especially vulnerable when the world economy collapsed.

Yes, Vince was a voice in the wilderness warning of high and unsustainable levels of private debt. But his warnings were taken rather more seriously in retrospect than they were at the time, including by the Lib Dems ourselves.

2) We opposed the scale of Tory cuts in 2010

We fought the 2010 general election on an economic platform which was somewhere between Labour’s and the Tories’, but was generally closer to Labour’s in terms of fiscal tightening, both in the phasing of deficit reduction, and also its balance between tax rises and spending cuts.

Had the electoral arithmetic been different, and a Labour-Lib Dem coalition been formed, there’s little doubt the parties would have agreed a less austere economic package than the one we signed-up to with the Tories. There’s no doubt that would have pleased many Lib Dem activists. However, having now committed to the Coalition’s austerity measures, members have in the main got behind it, as the results from our recent surveys have shown.

But we shouldn’t kid ourselves that the position the party now stands for is driven more by Realpolitik than it has been by our 2010 manifesto.

Conclusion

Such has been the visceral unpleasantness of the attacks mounted on the Lib Dems by left-leaning critics for the party’s decision to back the Coalition and the austerity package which was agreed, it’s no surprise that Ed Balls’ semi-U-turn has left many in the Lib Dems feeling vindicated.

And let me be clear here: I personally back the Coalition’s austerity programme. I believe it is the only responsible economic option for the UK at this time.

But I think it’s also important that we remember that the policies we’ve ended up supporting are not the ones that were in our manifesto. There’s a simple reason for that — we didn’t win the election — and also a less simple reason: the economic conditions have altered pretty drastically in the past 18 months.

So before we take pleasure in castigating Mr Balls it seems only fair to ask ourselves two hard questions.

First, given the Lib Dems backed Labour’s spending plans in 2005, indeed in many areas urged they went further, how far can we plausibly attack the mess Messrs Blair and Brown got the UK into?

And secondly, if we think Labour’s economic narrative is not credible, what would we have said about our own if we had been elected to govern (either on our own or in partnership with Labour) in 2010 given the similarities in our economic programmes?