What are the prospects for the British Labour Party? Since losing office in 2010, they have lost 3 subsequent general elections against one of the worst Tory governments in history. The government exemplifies bumbling incompetence. But that seems to be all that is required to outwit the Labour Party and its advisors. Since the disastrous December 2019 election, nothing much seems to have changed. Well, that is not exactly right is it. Things have become worse. They scrapped a leader that a significant portion of MPs could not support after having undermined him relentlessly in the leadup to the last election. It was as if they preferred to lose than have Jeremy Corbyn as Prime Minister. Then they kicked him out of party representation because he apparently has failed to ratify the dirty campaign against him. The new leader, was one of the most vehement proponents of the strategy that saw Labour turn its back on voters who had elected the majority of its MPS and keep harping on about a second referendum on Europe. The denial of the Brexit vote and failure to become the voice of Brexit cost Labour the last election no matter what those who try to manipulate the data to say something different might have you believe. The new leader also appears to be losing credibility over his purge of the previous leader. One can be as smooth and sophisticated as one likes. But if you don’t tell the truth, eventually, you pay the piper – even Trump has found that out, not that he exemplifies either smoothness or sophistication. And the other death knell – their fiscal rule – looks like it is now being recycled by the new Shadow chancellor. That means they will go to the next election in an unwinnable position because the citizens that they have conditioned to believe in the neoliberal macroeconomic fictions will, in turn, not believe that the Party can deliver a progressive agenda without causing financial chaos. You reap what you sow. So it doesn’t appear that they have learned very much so far.
Labour seemingly up to its old tricks
A Reuters report the other day (November 24, 2020) – Britain must rebuild economy with an eye on debt levels, Labour says – is bad news for any progressive Labour Party members who might have harboured ideas that the Party would jettison its fiscal rule nonsense that helped destroy its election chances last time.
I wrote a lot about the so-called Labour Fiscal Credibility Rule at the time.
You can see the sequence of blog posts by consulting this final comment on the issue – The British Labour Fiscal Credibility rule – some further final comments (October 23, 2018).
You will see links to 16 prior analyses of the Rule or rules in general.
I also had a meeting with the then Shadow Chancellor in October 2018 but his advisors just parroted the usual neoliberal nonsense about how powerful the City of London is and that government has to appease the financial markets lest they destroy the currency.
I left that meeting concluding that the British Labour Party hasn’t made much progress on the macroeconomic front since Dennis Healey lied to the British people about having to borrow from the IMF in the mid-1970s.
They were still wheeling out the same nonsense.
There was a followup post when it became clear that – Forget the official Rule, apparently, there is a secret Fiscal Credibility Rule (June 19, 2019).
As the election approached, I wrote this warning – Invoking neoliberal framing a language is a failing progressive strategy (British Labour) (November 19, 2019).
The point was that one cannot say that the Labour Party wasn’t warned about the stupidity of their ‘Rule’.
And, in the last weeks before the December 2019 election, they obviously worked out that the ‘Rule’ could not be delivered within the parameters of their proposed electoral manifesto and so, without fanfare changed it.
Please read – Impending British Labour loss may reflect their ambiguous Brexit position (November 28, 2019).
It was obvious that one doesn’t change a ‘Rule’ that is seen to be workable.
The point is that, by tying themselves into this neoliberal straitjacket, the British Labour Party limited the political space they would have to operate in.
The political debate would have become focused on whether the ‘Rule’ was being obeyed rather than what the government was actually doing with its policy parameters.
So, just days before the election, they changed the ‘Rule’ because so-called independent analysts agreed with my assessment that the policy manifesto and the ‘Rule’ were inconsistent.
So much for Labour’s team of experts and advisors who had pushed them into the ‘Rule’ corner, from which there was no where to go that was attractive.
Add in the Brexit calamity that Labour created for itself, and you have to 2019 election disaster.
The Reuters article suggests that the Party hasn’t learned much since December.
You can make your own mind up because the full video of the Reuters Newsmaker event (November 23, 2020) is available – HERE.
There is a lot of talk about jobs, jobs, jobs (JJJ).
But then there is also talk about “eyewatering spending”, “taxpayers’ funds” and so we are immediately framed back into Fiscal Credibility Rule language and concepts.
Ms Dodds was asked whether the deficit was important? She played into the implication that the interviewer was intending – that it would be too big.
She said it mattered.
I was hoping she would say that it wasn’t nearly large enough given her JJJ agenda.
She was asked why the deficit mattered.
She said that it mattered because:
While we may be currently in a situation where there are low interest rates, of course that may not continue forever. We don’t know what kind of economic circumstances are likely to be facing the country in the medium to long term …
And then she started quoting “IMF experts” as her authority.
Eventually interest rates are apparently going to increase and the government will not be able to afford such a big deficit.
Fiscal Credibility Rule Mark 2!
She said that the speed at which the government would have to cut the deficit depended “on the interest rate context”.
What happened to JJJ?
She preferred a longer-term perspective for “putting the brakes on”.
Was debt too high?
Well she claimed it was under the conservative government and a future Labour Government would have to adopt “a sensible fiscal position given the risk of interest rates increasing” (paraphrased).
She was asked how the government could rein in the deficit.
Well, apparently it has to get a grip on its current spending.
The Reuters article claimed that Ms Dodds:
… is an important part of Labour leader Keir Starmer’s drive to rebrand the party following the departure of hard-left leader Jeremy Corbyn, under whom Labour lost two elections and made big-spending promises.
This is the strange world we operate in.
Jeremy Corbyn’s Labour Party killed its electoral prospects not only because it was a divided rabble with the Blairites refusing to accept the world has passed them by.
Its own internal politics required it to adopt the Fiscal Credibility Rule and all the destructive language and framing that supports that.
It could not credibly advance its progressive agenda while it professed to be obedient to that ‘Rule’. Everyone, other than the self important advisors who led the Party down that road, could see that.
Now, Starmer is trying to run a JJJ agenda which will require massive deficits for the indefinite future especially given the chaos that the pandemic is creating in a Britain where the government and (maybe) the people prefer large-scale deaths to well administered and finite lockdowns (Victorian style).
And he wheels out Ms Dodds who just rehearses the neoliberal framing that is being revealed as time passes to be flawed at the most elemental level.
I cannot see Starmer surviving anyway. The Party is deeply fractured and will not heal easily.
And if he continues to purge the Corbynist elements and play cute about Europe then those fractures will deepen.
Ultra conservatives seem to be more progressive than Labour
And the strangeness continues.
I laughed when I read this commentary (November 25, 2020) – Calm down, stay cool – and drop this talk of tax rises. It’s too early to know how everything will settle down – from one Ryan Byrne who is the “Chair in Public Understanding of Economics at the Cato Institute”, and I do not need to remind anyone of the bona fides of the Cato Institute, which was founded by the Charles Koch Foundation as part of the Powell Manifesto strategy to sink social democracy.
Anyway, Mr Byrne, writing from the “home of conservatism” tells us that any debate about fiscal austerity at present:
… is massively premature. Yes, this pandemic has caused masses of government borrowing—producing a deficit of 21 percent of GDP or around £400 billion, … But we are (still) in a once-in-a-half-century pandemic where we have knowingly kept shuttered swathes of the economy and paid people to sit at home.
There will obviously be “deficit reduction” next year, in the sense that the vaccines ending the pandemic will bring furlough to a close, make Covid-19 test and tracing redundant, and see the end of the inoculation and PPE scrambles. Like demobilisation at the end of war, so the government will de-Covidise its budget with drastic cuts to virus-related expenditure. Likewise, as things re-open, tax revenues will ascend again. So, the deficit will fall.
But anyone who claims they know what level it will settle at, and so what “needs to be done” to re-achieve pre-Covid borrowing levels, is, quite frankly, talking poppycock – including the Office for Budget Responsibility.
Okay. Get that.
What they should be doing
The Tories are spending big at present and have seemingly resolved, for the time being, the conflict that their manic conservative wing might have brought given their obvious discomfort for such fiscal adventure.
It is also clear that they are lining the pockets of their mates through very questionable consultancies and contracts etc.
But instead of just saying that the Tories are corrupt and wasting spending, they should be out there on the front line congratulating the government on jettisoning its austerity narratives and using the currency capacities it possesses to help overcome the dual problems of Brexit and the pandemic.
They should be constantly noting that the old narratives about deficits and debt leading to chaos and insolvency are obviously without foundation and congratulating the Government on getting beyond those destructive myths.
They should be urging the government to spend even more and be comfortable about a much bigger fiscal deficit.
They should be congratulating the Bank of England for purchasing a high proportion of the new debt being issued by the Treasury.
They should be pointing out that this means the government can always control yields on any debt it (unnecessarily) issues so the future course of interest rates is really irrelevant to the viability of fiscal deficits.
They should be urging the Bank of England to go the next step and write off all the government debt it holds – and outline to the British people that it is just a number in a computer system that can be changed to zero as much as £100 billion, or whatever.
They should inform the British people that this would not change the viability of the Bank of England, and the inflation risks of the deficits have already manifest – they are in the spending growth not whether that spending is matched with debt issuance, and not variant to who holds the debt issued.
They should tell the British people how the Treasury actually spends – that is, that it instructs the Bank of England to type numbers into bank accounts on its behalf.
Type, type, type, JJJ.
And given the Government has already increased the Ways and Means account allocation, they should explain to the British people what that means and then urge an even greater increase to reduce the debt-issuance charade.
They could show the British people that using the Ways and Means facility doesn’t increase inflation and just makes the process of government more transparent and reduces the creation of corporate welfare (the debt-issuance charade).
Instead of claiming that they will have to worry about the debt, why not just show the debt up for what it is – previous deficits that have not yet been taxed away.
They should be advocating large-scale public sector job creation.
If they are serious about JJJ then they need to have a large-scale jobs plan.
All of this is what we call education!
It is also what we might consider to be leadership.
And the political pay off would be enormous because it would wedge the Tories well and truly.
It would open the fiscal space for a future labour government.
But, instead of taking advantage of the Tory abandonment of its traditional austerity mindset (albeit temporarily), the Labour Party looks like it is reverting to its Blairite form – its macroeconomic neoliberalism.
If it only realised that there is a tremendous opportunity to wedge the Tories while they are in a dissonant state (relative to their DNA).
By ratifying the large deficits etc, the Labour Party could make it much harder for the Tories to revert to form.
But by restating the sort of macroeconomics that underpinned the Fiscal Credibility Rule, all that Labour is doing is following the same track that has made it unelectable.
They should initially review all their advisors and clean out the ones that think the ‘City’ is dangerous.
Aside – Risk of Inflation
An interesting byproduct of the pandemic is that it has impacted on supply chains, which should increase the risk of inflation arising from bottlenecks, in the face of substantial fiscal support on the expenditure side.
The fact that no such price pressures have emerged after nearly 12 months of disrupted supply chains suggests that inflation is a difficult beast to provoke.
And then we get to the EHRC Report and the shocking way that has been handled.
Assessment: Unelectable as they currently stand.
PS: I caught my first flight today in 6 months. Very bizarre. But it is great to be back in Melbourne.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.