Progress launches a debate on the challenges the party faces
An incoming Labour government in 2015 will face enormous challenges. The failure of the coalition’s economic policies means that the government will miss its self-imposed target to eliminate the deficit and threatens to extend the ‘era of austerity’ into the next parliament.
Nor does Britain face a once-in-a-generation Herculean task to balance its books:
With tax revenues remaining broadly flat and spending on health, social care and pensions rising, the country is predicted to slip back into deficit by 2030, with long-term demographic change threteaning to push the nation’s debt to almost 90 per cent of GDP by 2061, up from a pre-recession level of 40 per cent.
The environment Ed Miliband will face in No 10 will, self-evidently, be very different from that which faced Tony Blair when Labour returned to government in 1997. It is, of course, true that Labour inherited a mountain of social and economic problems – most particularly, chronic under-investment in Britain’s public services and infrastructure and high rates of long-term unemployment – left unattended by 18 years of Tory government. And while it inherited a growing economy, the Tories also bequeathed high levels of debt which Labour paid down during its time in office. That said, public finances which were not as weak as Britain’s are likely to be in 2015.
Despite the fiscal straitjacket the party imposed upon itself by accepting Kenneth Clarke’s self-described ‘eye-wateringly tight’ spending plans for the first two years of its time in power, public spending rose by an average of 3.4 per cent a year in real terms between 1997 and 2010. By contrast, it had averaged 1.6 per cent growth a year between 1979 and 1997. Health and education spending rose particularly sharply: the former by 6.3 per cent a year – double its previous growth under the Conservatives – so that it constituted eight per cent of GDP by 2010; the latter by one-third during Labour’s time in office to six per cent of GDP by 2010.
An incoming Labour government in 2015 will not be able to countenance such increases in spending. Instead, the challenge of closing the deficit and tackling some of the long-term fiscal pressures the country faces will require some tough choices and radical thinking if Labour is to bring about progressive change.
The Purple Papers: Real Change for Britain, Real Choices for Labour aims to begin a debate among party members at the grassroots about the decisions Labour will have to take as it begins to think ahead to its manifesto in 2015.
The papers examine four big themes – restoring economic growth; getting Britain working again; rebuilding public services; and tackling the ‘care crunch’ – and presents some of the options and choices the party will face.
Take the following four examples.
First, Labour left office with NHS satisfaction levels at a record 70 per cent, but with the fact remaining that 10,000 lives in England each year would be saved if cancer survival rates were raised to the European best. Such instances can be found across the public services. How, then, without the money of its predecessor, does the next Labour government devolve power to excellent public service providers while reforming those which are currently failing or face huge future challenges?
Second, by 2015 for 14 years in a row the British state will have spent more than it raised in taxes, leaving it with interest payments on the UK’s debt of £60bn a year, twice the size of the tax credits budget. We know that a return to growth will help to ease this challenge, but how much risk will the next Labour government be willing to pay in order to attain it? And – once it has cracked down on tax evaders and benefit cheats – how much is Labour willing to ask of those who are more deserving of its sympathy as it seeks to restore the public finances and rebuild the economy?
Third, before the financial crisis, employment in Britain topped 74 per cent, but despite 17 years of growth, the number of people on out-of-work benefits never dropped below four million. How, then, can Labour develop a pro-jobs employment policy and spending strategy, and enhance the social insurance principles which William Beveridge intended to underpin welfare?
Finally, universal childcare will cost the country an estimated £7bn per annum, while the OBR predicts public spending on long-term care will rise by 40 per cent by 2030. Investment in childcare will help boost the employment rate, ease living costs for families with children and reduce child poverty. But finding the necessary funding will involve some difficult calls: should Labour seek to freeze child tax credits and child benefit or reform wealth taxation to generate additional revenues? Should the party aim to close the social care funding gap by introducing a ‘mansion tax’ or curtail ‘welfare for the wealthy’?
This publication, which will be accompanied by a series of Westminster seminars and regional debates over the next nine months, builds on the argument of last year’s Purple Book. It argued for a redistribution of power in the state, market and our public services, and for Labour to turn its back on the ‘big state’.
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