Are we all fiscal conservatives now?

It’s a good question, because the debate about leftwing fiscal conservatism is taking an unexpected direction.

When Policy Network published In the Black Labour there was a great sense of all sides gearing up for one of those TIGMOO fights we’re all supposed to enjoy – ‘come on in, the blood’s lovely’.

It’s rather encouraging that there’s been much less faction-fighting than seemed likely at first, and that’s in large measure because most people have turned out to be more reasonable than perhaps even they originally expected. Most Labour and progressive people who’ve thought about it agree that they need an economic strategy that says how the deficit will be brought down.

People on the left who were initially disposed to bristle at ‘fiscal conservatism’ assumed that it meant accepting the government’s austerity. But Hopi Sen in particular has emphasised the fact that:

‘In a demand crisis, you need to take action, and do so dramatically and boldly. To do otherwise isn’t being fiscally conservative, it’s just being stupid.’

When he wrote that, in December, it needed pointing out. It’s less necessary now when even the IMF agrees that ‘fiscal consolidation ― reducing deficits by cutting spending or raising revenues ― can and usually does stifle growth’ and cautions against going ‘too far, too fast.’ There are limits to how far the international economic organisations can publicly criticise a government, but it’s reasonably clear that privately the IMF, OECD and ILO all think the UK should slow the pace of fiscal consolidation to restore growth.

So far, so bland. I’d like to make a couple of minor negative criticisms of fiscal conservatism and then conclude by thinking about its most important positive contribution.

I really hate the term ‘fiscal conservatism’. It sells the pass by associating responsibility with our opponents. Even worse, it implies that we accept that we are fiscally irresponsible. This re-enforces the notion that UK Labour bears a unique responsibility for what was, after all, a global crisis. The deficit did not balloon because the last government overpaid dinner ladies and binmen or because it recruited too many NHS pharmacists or police officers.

The contribution made by failing to ‘lean against the wind’ was massively overshadowed by the collapse of tax receipts. Very few people recognised that this was a risk because the UK’s unbalanced economy was the result of an economic strategy that the government and opposition agreed upon.

Yes, the electors blame the last government more than the current one for the deficit. This means the Labour party must urgently respond to this perception, but accepting more than its fair share of the blame is not a good way to go about this.

A rather more important result of ITBL is that we’re thinking ahead to the tough spending choices that we’ll have to make once the economy does start growing and we can’t rely on the reflex ‘cuts kill growth.’

The Labour frontbench, I think, have recognised this right from the start, but rank-and-file understanding of the fact that there won’t be any money for extra spending in 2015 is much more common than last time round. It’s only two years since the election – last time round, economic realism was pretty scarce even by the time of the 1987 election.

Of course, we’re still a long way from happily talking in the ‘language of priorities’ – sacrificing a benefit to pay for a service, for instance. The ITBL authors have happily pointed out that some people’s acceptance of the need to make choices is a bit glib. But the same criticism could be directed the other way. My favourite phrase in In the Black was:

‘In the coming decade, the extra resources New Labour found to compensate for market-based inequality won’t be available. So deeper and more ambitious reforms must be confronted to ensure the economy works for working people.’

Now, as I read it, that means that fiscal responsibility must lead to a commitment to reforms that are more radical than redistributive benefits and services. Tackling the economy so that the initial distribution of wealth, power and income is much less unequal would, it is true, mean that we would not have to spend so much on benefits and services. But that wouldn’t make life easy for a radical egalitarian government.

Think of the things that we know have reduced inequality in the past, such as the extension of collective bargaining, labour market regulation, stronger anti-discrimination legislation and greater social control of private businesses. We don’t have to reintroduce all these measures, but they give an idea of how controversial, politically charged and administratively difficult such a programme would be.

The difficult choices aren’t just about not being able to spend as much money as we’d like.

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Richard Exell is senior policy officer at the TUC

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