The Guardian reported comments made by current Shadow Chancellor Chris Leslie today in an article headlined “Corbyn’s economic strategy would keep Tories in power, top Labour figure says”. To me it says much more about the Labour right than anything Corbyn has come up with. It’s the mode of thinking Leslie expresses that will really keep the Tories in power. If Corbyn does win, he needs to make a clean break from the sloppy thinking set out in the Guardian’s article.
The current view on the economy in the Labour Party is identical to to that expressed by the Conservatives (but completely at odds with what most sensible economists would advocate). That is to say they think is the government’s deficit gets too high, and the total stock of debt gets too high, ‘the markets’ will start to doubt the government will be able to repay their debts and interest rates will rise, which will mean the government actually can’t repay its debts and may have to default, leading to economic ‘chaos’. To mitigate this risk, the government needs to cut spending/raise taxes to try and reduce its deficit in order to get the public finances back on a sustainable track.
It’s not clear at all to me that the Conservatives actually believe this argument, but that’s the one they have been endlessly repeating and which Labour apparently agree with. The trouble is though, if you accept this argument as true, Labour’s calls for ‘fairer cuts’ looks incredibly weak and makes it easy to attack. I don’t see how Labour can win with this argument, but the media and the Westminster establishment seem to think it’s an absolute must. I got an email from the Liz Kendall team today giving me a long list of nice sounding ideas (with no detail) about her ‘vision’ for the country, but while maintaining this wrong model of how the economy works, she and others in the Labour Party can argue for nothing more than that they will be better managers that the Conservatives. If you buy the argument on deficits and nobody is disputing that version of reality, surely you would just vote Tory?
The current view however, is nonsense. The economy just doesn’t work like that. The government always has as much money as it needs. High deficits don’t lead to higher rates, and there is no chance the UK would ever default on its debts. What we need is someone who gets this and doesn’t let bad economics prevent them for arguing for what needs to be done. Can Corbyn be that person?
The Welfare Reform and Work Bill is making its passage through Parliament at the moment. After much hand wringing, Labour instructed its MPs to abstain. Only 48 defied the whip to vote against. Media Commentators including those at the supposedly left-wing Guardian agreed this was smart politics. For others though – including me – it begs the question once again, what is the Labour Party for?
But what is in this Bill that Labour found so difficult to oppose? The explanatory notes to the Bill can be found here. Here are some of the measures Labour felt they could not vote against:
- Reducing the benefit cap to £20,000, except for £23,000 in Greater London
- Freezing certain social security benefits and certain tax credit amounts for four tax years
- Limitation in the amount of support provided by the child tax credit for families who become responsible for a child born on or after 6 April 2017
- Limiting the child element of universal credit to a maximum of two children and removing the distinction between the first and subsequent children in the rate of the child element
- Removing the work-related activity component in employment and support allowance and the limited capability for work element in universal credit
- Changes to conditionality for responsible carers in universal credit
- Replacing current support for mortgage interest payments for benefit claimants with the offer of a recoverable interest-bearing loan secured as a second charge on claimants’ properties
The one on mortgage interest payments was new to me and appears particularly nasty. If you are unfortunate enough to lose your job, the government will loan you the money to pay the mortgage interest, but if you can’t repay it whilst in work, they will take your house. Not sure that really falls within the definition of social security.
If Labour can’t oppose real terms cuts (for 4 years!) to working-age benefits, replacing support for mortgage interest with interest-bearing loans secured against the property and a 30% cut in social security payments to many who are sick or disabled, then seriously, what is the point of them?