Five years of lost cause: Why Ed Miliband couldn’t win the deficit argument

Labour came into the 2010 election facing nigh insurmountable barriers. Our reputation for economic competence had been shredded by the financial crisis; we were divided and exhausted, following years of bad headlines and bitter infighting; we faced a resurgent Conservative Party, finally rebranded by a charismatic leader; and political debate was framed by the Eurozone federal debt crisis which pushed Greece (a country with a smaller deficit than the UK) to the brink of bankruptcy. In this poisonous environment it should be no surprise that Cameron and Osborne et al were so successful in persuading people that the UK’s economy was just days from total meltdown. That severe and immediate spending cuts were essential to prevent us from ‘ending up like Greece – oh, and by the way, it’s all the previous government’s fault’.

Their critique is all the more effective because it worked on several levels of comprehension. The typical voter is not politically engaged, they simply have more important things happening in their lives. Perhaps they catch the occasional 30 seconds of a news coverage, or glance at the headlines every few days, but not a whole lot more. Many saw the massive deficit, the ‘letters of direction’ to civil servants, and a left-wing party always inclined to outspend their opponents, and understandably assumed that it must have been the post-financial crisis stimulus that has caused the debt ‘crisis’ (though probably not quite in these terms). Or maybe they believed, as the shadow cabinet now seems at pains to rebut, that the financial crisis itself was caused by overspending.

Were these the only Conservative lines they would have been easy to ridicule, and the public debate would have quickly moved on. However, when required, the Conservatives could rely on an entirely different claim, that Labour’s spending was too high before the financial crisis. This argument could (and probably does) fill several books, but its veracity is almost unimportant. Its primary purpose was to provide cover for Conservative themes of deficit, overspending, economic competence, long term plan etc. to run ad nauseum. If people drew the conclusions of the previous paragraph then all the better for Conservative HQ.

There was also the superficial plausibility of the Conservatives’ solution to contend with. If the government brings in less money than it spends, then to cut public spending sounds almost redundantly obvious. And therein lay our biggest problem. Of course the cuts were not actually necessary (at least, as soon and as severe as they were), but the reasoning behind them appears totally compelling to anyone without an economics degree or a Labour Party membership card. Moreover, the opposing (correct) argument requires advanced economic understanding to appreciate.

Ann Black, who would know as well as anyone, tells me that 90% of Labour members believe we lost the arguments on the causes of the financial crisis, and on how we should deal with the deficit, in the months after the 2010 election. It is certainly true that every coalition lackey who found themselves on TV was keen to blame Labour for the ‘mess’ the public finances were in. Some even went as far as to describe the cuts as ‘Labour cuts’ on the basis that our spending had necessitated them. My issue with this view, however, is that to say we lost the argument over this period implies that it was ever winnable.

I can only assume the Eds’ agreed with me. Instead of robustly defending the record they attempted to distance themselves from the previous government, presumably hoping that the 2015 election could be fought on the future vision. If so, they underestimated their opponents’ ability to control the media. Throughout the campaign shadow ministers were repeatedly asked whether the previous Labour government had overspent. In response they pursued the entirely transparent tactic of refusing to answer the question. The interviewee would admit responsibility for insufficient banking regulation and hope no one would notice that they’d not conceded fiscal incompetence or defended the (by now effectively indefensible) previous government’s spending. Of course, everyone did notice, and the question would then be repeated, only to receive the same answer. Worse still, when interviewers finally tired of this flatbatting they would move onto whether our future plans involved more or less debt than the Conservatives’ – which the unfortunate shadow minister was again forbidden from answering.

For what it’s worth, here is the correct answer: “Only if you base the debt calculation on growth projections we don’t think are credible given the severity of the planned Tory cuts. They will significantly reduce demand in the economy, hence produce lower growth, hence lower tax receipts, and hence debt will be higher than would have occurred if we assumed spending had no secondary effects. Exactly how much higher is impossible to say but it could well be our lesser savings counter-intuitively lead to lower debt. Even if they don’t, the cuts will be so harmful that avoiding them is worth a small amount of extra debt.”

This is simply too technical to cut through with more than a handful of swing voters. The only high profile election event featuring anything approaching this argument was Ed Miliband’s interview with Evan Davies, and he came off sounding unreasonable and evasive.

Those who bemoan our leadership’s unwillingness to challenge the Conservative economic narrative should consider how they would explain Keynesian economics to a sceptical audience in a twenty second slot on Question Time. Now suppose it’s followed by a cabinet minister proclaiming ‘you can’t borrow your way out of a debt crisis’ to rapturous applause. Work out how to simply, quickly, and persuasively respond to the accusation that Labour ‘maxed out the nation’s credit card’ or the likening of the national finances to a family budget. It just wasn’t possible. I don’t believe even Tony Blair could have won this argument.

Labour’s economic reputation does not have to be lost forever, indeed it must won back as soon as possible. Working out how we do this is the main reason I have started this blog. But as we comment from our armchairs we should bear in mind a simple truth: Just being correct is not enough – if you can’t sell an idea to the layperson, it’s worthless.


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