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After Coronavirus: Labour Must Remain Firmly Opposed to Austerity

After Coronavirus: Labour Must Remain Firmly Opposed to Austerity

After 10 years of austerity, the UK is now starting the new decade with a larger budget deficit than it was facing in 2010 when the Conservatives came to power. The Coronavirus pandemic has necessitated huge levels of government spending on loans for businesses and the furlough scheme, amongst other things – and this combined with reduced tax revenues due to loss of income means that the treasury is reportedly anticipating a budget deficit for 2020 of £337bn, equivalent to roughly 17% of GDP (Over double the £150bn deficit after the 2008 financial crash).

The scale of the problem facing the UK means that the government are already looking at potential tax increases or spending decreases that they could make to ease some of the problems caused by large levels of debt, but neither of these options are without their issues. In their 2019 manifesto the Conservatives pledged that they would retain the pension triple-lock and wouldn’t increase income tax, but choosing to keep these promises would mean making huge cuts in areas that have already been cut for the past 10 years; there is very little left that can be slashed. Successive Conservative governments since 2010 have made budget cuts across all areas of public life: leaving hospitals and schools with budget black holes, closing vital community facilities such as sure-start centres, and being a key cause of 120,000 early deaths. With the impending recession likely being larger than the Great Recession of 2008 it is doubtful that the UK’s public sector can withstand at least another decade of spending cuts.

It is an inevitability that the Tories will soon be making cuts to public services, but with the lasting economic effects of the coronavirus pandemic likely having a large impact on our lives for several years to come, it is imperative that Labour have a comprehensive policy package and compelling narrative to take into the 2024 general election. Labour needs to not only make the positive case for public services and investment, but also challenge the narrative that the Tories are a “safe pair of hands” by pointing out the failures of austerity politics on a macroeconomic level. Since 2010 the UK’s annual GDP growth has been consistently stagnant, rarely reaching the 2% minimum target, particularly when compared with the Eurozone average – which includes the deeply troubled economies of Greece and Italy.

The UK’s low rate of growth throughout the 2010s is hardly surprising considering the stripping away of any state safety net, a decline in real earnings, and increasingly insecure working conditions that leave people with smaller disposable incomes and prevents hopes of consumption-fuelled growth – in spite of record low interest rates. Looking at levels of capital investment in the UK since 2010 doesn’t make the Conservatives’ record look any better either, as levels of investment have been below the 2007 figure for every year that the Conservatives have been in power.

George Osborne once claimed that he was going to “Fix the roof whilst the sun was shining”, but poor growth, low investment and declining wages appear to be the clouds that have blocked out his metaphorical sun. With British society now divided, damaged, and once again indebted it is up for debate whether he managed to fix the roof – and with the UK’s finances in an unhealthy shape it is likely that the Conservatives will repeat the same mistakes of the 2010s and condemn us to another lost decade.

Early signs from the new Labour leadership are certainly encouraging in terms of public spending, with Keir Starmer saying that the UK can’t go back to business as usual… and go for another decade of austerity”. Similarly, his description of Labour’s 2017 manifesto as “our foundational document” suggests that despite the fact that he has drawn comparisons with Tony Blair, he and Shadow Chancellor Anneliese Dodds will seek to prioritise investment in public services instead of ceding ground to the Conservatives and proposing watered down versions of the same austerity doctrine in the way that Ed Miliband did in 2015. Labour’s 2015 manifesto only pledged to protect spending in health, education and international development, leaving all other areas vulnerable to cuts and fundamentally undermining their attacks on Tory austerity. Labour should not seek the credibility of people that will never find Labour credible or vote for Labour, and instead should build a coalition of voters that are opposed to the destruction of state support by making clear both the inequity and the economic illiteracy of austerity.

Keir Starmer has kept his cards very close to his chest during the early months of his leadership, so it will likely be some time before we start to see what Labour’s policy positions will look like for the next 4 years but with Starmer now leading Boris Johnson in terms of approval rating he has a real opportunity to control the narrative on the deficit. By 2024 the Conservatives will have overseen a decade and a half of cuts, and if Labour can unite to effectively counter the Tory message of stability then they can win power and change the country, but a return to austerity-lite would almost inevitably give Labour another term on the opposition benches.

Jude Stafford

24 Jun 2020

Photo credit: Chris Ratcliffe