What would Labour do?
With the autumn statement looming and the prospects for the public finances looking ever worse, Labour can’t duck the question for much longer: what would you do? Progress’ recent collection, The Purple Papers, began to sketch out some answers and today the Fabian Society is picking up the baton by launching a new Commission on Future Spending Choices.
The commission, chaired by John McFall, is asking how a 2015 government should make public spending choices, and at our first hearing this morning we took evidence from Patrick Diamond on his contribution to The Purple Papers. The starting point for the Fabian commission is simple mathematics: there are no plausible scenarios where there will be lots of extra money available for public expenditure between 2015 and 2020. So almost all the extra spending a Labour government might want to pledge will need to be paid for by savings elsewhere.
This isn’t the same as saying Labour should follow the Conservatives’ spending plans if re-elected. After all, George Osborne’s deficit reduction strategy represents a political choice to ‘overshoot’ Britain’s long-term average for public spending as a share of economic output. By taking a bit longer to pay down the deficit and doing more through tax rises a future government does not need to be so reliant on cuts. But even in this more optimistic version of events, real spending would have to remain basically flat for another parliament. It will feel like austerity.
I’m labouring the point that fiscal realism is not the same as Osbornomics because this has implications for how we conduct the debate within the left. While some within the Labour family believe there are strategic political reasons for hugging close to the coalition’s spending plans this will always be a minority view. On the other hand realism on the public finances needs to be something everyone can embrace – and this must include open, respectful though, at times, difficult conversations with our colleagues in the union movement.
The Fabian commission will also look at the long-term prognosis for UK public spending. Here I am more optimistic than the prognosis set out in The Purple Papers, which argue that, unless we take action, the costs of pensions and public services in future decades will lead to spiralling public debt. This may be true, but the Office for Budget Responsibility is at pains to point out that the adjustments needed to cope with projected public spending rises are very modest and can be implemented gradually over decades.
The commission will ask what scope there is to save public money through economic reforms and which forms of public spending will boost employment, earnings and growth, two issues given a good airing by The Purple Papers. The Progress collection makes the case for childcare spending to be perhaps the highest priority for new spending and our commission will critically evaluate the claims for universal childcare alongside other competing proposals. By looking across the whole of public spending we’ll be able to judge the merit of the competing ideas bubbling up across the left – and also spot where the same pot of money is expected to pay for lots of different things!
The commission will also look at how the public sector can better manage flat budgets so that improvements in services really happen. In labour-intensive services like health and education there is a continual struggle to ensure that quality rises in line with costs. All the witnesses at our first hearing, including Margaret Hodge, chair of the public accounts committee, agreed that New Labour’s approach to outsourcing and part-privatisation had not delivered the value for money originally hoped for. But the left does not have credible answers yet for how it will achieve services which are both more human (‘relational’, to use the latest buzzword) and more efficient.
Both The Purple Book and the Purple Papers open up some of the key issues a future programme for government needs to grapple with, and there have been other important contributions from across the left. The Fabian commission will be magpie-like, gathering and evaluating the best ideas from wherever they come. In a year’s time we hope this means we’ll be able to present a coherent strategy for public spending after 2015.
Andrew Harrop is general secretary of the Fabian Society. He tweets @andrew_harrop
autumn statement, childcare, Conservatives, Fabian Society, George Osborne, Labour, Margaret Hodge, New Labour, Office for Budgetary Responsibility, Patrick Diamond, Purple Book, Purple Papers, universal childcare