Ed Balls’ speech to Thomson Reuters yesterday grabbed headlines for its concession that paying a winter fuel allowance to the wealthiest 5% of pensioners could no longer be justified. The likely saving — at c.£100m a year, no more than a rounding error in the national accounts – may be modest, but the symbolism is significant.
This is Labour accepting (at long last) the new normal of austerity: current departmental spending will continue to be reduced in the next few years even as the long-hoped-for economic growth returns. Though Labour’s shadow chancellor is hard-wired never to accept the fact, he is having to come to terms with the obvious – the Blair/Brown government made spending commitments the nation couldn’t afford (as Nick Thornsby set out here).
All parties were complicit in this, by the way. While ‘Sunshine Dave’ and the Tories promised to share the proceeds of growth, the Lib Dems committed to expanding pretty much every public service going — new police, teachers, and nurses – and just add it to the tab, please. We’d have all been a lot better off (quite literally) if political parties had paid attention to Keynes in the boom years, and not just when the credit bubble went pop.
Politically the move matters: it opens up the space (previously occupied solely by the Lib Dems) of targeting welfare spending where it’s needed most. As I’ve argued before, we should be unashamed of putting forward the case for re-distribution as the foundation of not only a decent society, but also a prosperous one. Where once only Nick Clegg feared to tread, it’s now likely Ed Miliband and David Cameron will also step forth. Only Nigel Farage will stick by pensioners’ perks, ensuring Des Lynam can continue to heat his modest des-res.
More important, though less commented on, was Ed Balls’ decision to trail the dropping of his VAT cut, the key step in his much-vaunted ‘5-point plan for growth’. This is sensible, which is more than can be said for the original idea: the fiscal multiplier on a temporary VAT cut is too low to make it worth the Government’s while.
Instead, Labour will prioritise extra borrowing on capital investment. Fair enough: the Coalition’s second biggest economic mistake was to follow Labour’s March 2010 spending plans and slash the investment budget as the ‘easy’ way to turn off the spending tap. (The biggest mistake, by the way, was to put George Osborne in charge of the economy.)
It seems all those text exchanges with Vince Cable have had the desired drip-drip effect: Ed Balls is starting to talk the Lib Dem language. Re-distributing taxpayers’ money to those who need it most. And recognising that borrowing to invest is prudent (but spending on the never-never isn’t). There’s a re-alignment taking shape in front of us here – and that may turn out to be the most significant aspect of all in what Mr Balls had to say.
* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.
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27 Comments
I must say the last time Ed Balls admitted that he would not be in a position to reverse any cuts, it certainly didn’t change Sheffield Labour’s attack lines one jot. So I’m not going to hold my breath. It is going to take more than £100m of savings to demonstrate that Ed Balls really understands the situation. Rather than £100m of savings followed by a list of spending commitments, a list of savings followed by one small spending commitment would be closer to reality.
And I suppose they could take the position that any given cut is not necessary now but will be in 2015. That’s pretty hard to sustain, particularly if the deficit drops at all between now and then.
This is all fair comment but its putting a lot of weight on some very small shifts in one policy area. The “Two Eds” have made similar shifts to the Centre before, only to jump another way later. Ed M was elected as the Unity candidate & that makes it very hard for him to drag Labour away from its comfort zone.
In any case I simply dont see the evidence that suggests Labour will be available as a coalition partner. My best guess is that Labour will emerge with a reduced vote share, still well behind The Tories & very badly split.
Not a chance of a realignment while Clegg allows the lobbying bill to be hijacked in a blatantly partisan way.
http://www.guardian.co.uk/politics/2013/jun/03/cameron-moves-union-funding-labour
Wonderful stuff, Mr Balls. It would be credible to argue that Osborne’s austerity policy was a disaster and put forward substantial proposals to change it. It would be credible to argue that most Coalition policies were unavoidable and that Labour stood for minor tinkering such as the reduced winter fuel payment. What isn’t credible is to say that Osborne is a disaster and that Labour will nevertheless do much the same as Osborne did.
Lib Dems must be incredibly careful about any Labour advances. Need I remind us of 1997
Superficially we may have a lot in common with Labour but their concept of a fair, free and open society is vastly different from that on which our constitution is based. We cannot ignore Labour but at the same time dealings with them must be at arm’s length or they will swallow us up like a hungry dragon.
“The journey of a thousand miles starts with a single step.”
Which is about as far as Ed Balls has so far gone with acknowledging the true scale of cuts which have to be made due to the previous Labour government’s dalliance with their banking buddies in which the chief gofer was. . . . . .
Frankly, I don’t care which direction Ed Balls is going in and for us Lib Dens to draw some kind of ‘comfort’ from his change in position is to forget the past. How often have sound well thought out Lib Dem ideas been adopted by other parties? I don’t think this is a good idea because it opens a crack in universal benefits even wider (child benefit) and no thought going into where it will stop if at all. The bottom line is the rich don’t pay their taxes, corporations exploit and people are in general underpaid (thus having to be subsidised by government & therefore us).
I went to the Labour Party being with the Lib Dems for over 21 years, I feel this is a wise choice.
In the last Government I found them to be easy to listen, as my interests are in children’s law.
I will do my best to make clear we, have problems that are hurting, we need solutions, we need to be accountable with the public purse.
So I apparently agree with UKIP that universal benefits should be retained? When did it become party policy to scrap universality? As has been pointed out above, the abandonment of this principle saves piffling amounts of money, and the cost is the destruction of the contract between the state and the people whereby everyone has to contribute by way of income tax and national insurance, and everyone receives the same benefits in respect of pension, fuel allowance, free bus transport, free prescriptions etc. Break that contract and how do you argue against the people who say, “Well, I don’t use this or that service, so why should I pay taxes to support it?”?
a realignment with ? I hope not
sorry should have said, with Labour ? I hope not
Universal benefits are a fundamentally aspect of the Beveridge settlement. What is appalling is nothing to do with Labour – it is Nick Cleggs abandonment of the Beveridge Principles. The Conservatives have always sort destroy the 1945 settlement, of which Liberals were the architects, but under Clegg our party has voted again and again to attack the gains made in 1945, whilst on the economey we deploy the same old failed Conservative economic policies and ignore our Keynsian heritage.
As Beveridge sais a system that is just for the poor will soon become a poor system. Nick Clegg has got one thing right – joining the young Conservatives at University.
It is disappointing to step back from the principle of universality, symbolically, it will mean these benefits will be just for the poor. In my view, it would have made more sense to tax the freebies for people in certain income brackets as if they were company benefits.I’m sure hmrc could cope with that.
I don’t hold out much hope of a labour reapproachment with many libdems. This isn’t to take away from any babysteps below the radar (especially in the North) but I just don’t think they’ve learnt why the public grew exhausted with them. They remain tribalistic, candidates for election remain political stooges, they can’t articulate a message many can identify with and for some reason, they can’t tap into the resentment people feel for this government or even against the lib dems unless they tap into xenophobia and jingoism. Sensible libdems may want to identify preconditions now for any coalition but with labour, they should also base their relationship on respect for the grassroot views of the party, not just the leadership.
The recent election results have shown, just how unhealthy our politics are.
There is little true concern for the working class, and I add myself to that group. Carry on as you are going, and anything can happen in the next election.
Lack of purpose ,and stability.
Utterly shameful – after the vilification heaped on the government for cutting benefits from the better off Labour now say they would do exactly the same. I don’t expect Ed or Ed will apologise for their rank hypocricy.
Oh, but Joe and Julian, that’s par for the course. They’ll continue doing what they’ve often accused us of doing – attack with one voice at the local level and speak with another voice nationally. In our case we have the defence that the local party or council group may well have decided democratically to take a different line from the party at Westminster. They just do the obvious things for oppositions and on the whole you can get away with more rubbish locally than nationally because of the national media attention.
Yes, these shifts might make Lib-Lab co-operation nationally a bit easier, but a lot will depend on the election result and on what kind of arrangement Ed Milliband could carry his party with him into.
Our party should stand by its liberal principles of universal benefits. Mean-testing is expensive and benefits don’t always go to those who most need them. A means-testing cut-off point always acts against the middle income/wealth and will produce resentments from those that struggle to pay in to these schemes and don’t receive.
Redistribute: Yes, but go after taxing the 1% in the interests of the 99%. It is the bankers that caused this crises in the first place. With the conditions that caused the crisis still existing: i.e. Fractional Reserve banking, naked derivative gambling etc, this needs to be closed.
This party really needs to think its direction otherwise it will just become a 2nd Tory party.
“liberal principles of universal benefits”
In what way is universality a “liberal principle”?
Basically it amounts to giving people who don’t need help a chunk of tax revenues, because of the fear they may be greedy and not understand why poorer people sometimes need support. Nothing liberal about that, whatsoever.
The two Ed’s may well be moving to the centre – or trying to deal with the public perception that it was their profligacy which caused the 2008 crash. Without holding on to some sort of false nostalgia about the 1945 settlement, we have to surely articulate an economic and social policy which encompasses universalism and emphasises Paul Krugman’s sort of economic policies for the future.
At the moment, the electorate is likely to face an election where there are no real differences between the parties – all of them endorsing austerity and permanent cuts in the role of the state. How do I vote? Either not at all or Green I suppose.
Simon Banks
Oh, but Joe and Julian, that’s par for the course. They’ll continue doing what they’ve often accused us of doing – attack with one voice at the local level and speak with another voice nationally.
That is Labour all along. When they lose, they don’t stop to think what they did that made them unpopular, and they don’t spend time developing alternative policies. They believe they are naturally the party of the people, therefore they should naturally be our rulers, and if they are not it is all the fault of others – particularly us. So they will throw abuse, and make negative points only, with the idea that this alone will cause a swing of the pendulum back to them. Then once they are in they end up with “Oh, now we have to govern, what shall we do?”, and find that they end up doing much the same as those they were throwing at when they were the opposition.
That is why to this day they believe it was all the fault of the SDP that the Tories won elections in the 1980s, totally failing to see that since every poll showed Liberal/SDP voters splitting evenly between Labour and Tories as second choice, they would still have lost massively had there been a pure two party system back then. That is why the Liberal Democrats are blamed by them now for this current government, as if somehow had we not existed there would be a Labour government in place right now, failing to accept they lost the last election, and the twisted electoral system they support meant there wasn’t even enough of their MPs and our to form a coalition even if they were willing (which they were not).
Most of all, see how damaged we have been over the student tuition fees issue. Labour have attacked us mercilessly about it, and have profited in the polls from it. Has a single Labour spokeperson ever said how THEY would pay for university education? No – they know if they got back in they would have to keep the fees system as it is, they don’t have the guts to propose a serious alternative which might mean big tax rises.
Lib Dems must be Lib Dems and not negotiate with any other party until you see the whites of their eyes. And next time take more time over the negotiations if necessary.
@Matthew Huntbach “Has a single Labour spokeperson ever said how THEY would pay for university education?”
Labour commissioned the Browne Report to answer exactly that question, and they would almost certainly have gone along with its recommendations. The problem for Lib Dems is that we did that after loudly condemning Labour for its betrayals over fees for students and saying we would do the opposite. And it gets muddier still if we ask ourselves, “What is current Lib Dem policy on tuition fees, and what will Lib Dem policy be in 2015?”.
@AC Noblet “Lib Dems must be Lib Dems and not negotiate with any other party until you see the whites of their eyes. And next time take more time over the negotiations if necessary.”
I agree with the sentiment, but there is the risk that if we are awkward when negotiating with Labour after capitulating to the tories in 2010 it might give the impression that we are much more comfortable with one party than the other.
Peter Watson, this is inevitable. If the next General Election results mean that a Lib/Lab coalition is the only stable Government, Labour will likely insist, as they did in 2010, that we abandon our policy platform and adopt theirs wholesale – knowing that if we refuse, they can paint us as being close to the Tories.
Dave Page “Paint us [accurately] as being close to the Tories” (our leadership, that is, if still the same group). Our negotiation in 2010 has made it very difficult for the future.
I just can’t see the relevance of Labour anymore. They will win many seats at the next election, but to what aim? ONLY THE LIBDEMS will provide a strong economy with a fairer society.