Stuart King explains why Labour's problem with debt is more serious than we think.
However much we may believe that Labour took the right decisions in response to the global recession, it seems indisputable that we have failed to stop the Conservatives from successfully painting us as the party that saddled the country with a public sector debt the scale of which has not been since the Depression.
It’s a political disaster that Labour should (again) find itself seen as the party that would have Government live outside the country’s means. Labour’s Polling Queen, Deborah Mattinson, has re-formed her focus groups and the verdict from Harlow (& elsewhere) is stark: Labour’s reputation for economic competence – so hard fought for in the 90s, is now “in tatters”.
Is it any wonder? Sure, the economic whirlwind that hit our shores, also hit the shores of many other countries. Yes, it was a global recession - made in America and carried to the four corners of the world. But when you consider that it is primarily Labour’s own core voters who are often, through necessity, those in society living on the tightest budgets, is it any wonder the public baulked at our bailouts and the bankers’ bonuses that followed them.
The Keynesian response we adopted, whilst right, was counter intuitive to the average voter. Turning on the spending taps at a time when your own income has fallen so dramatically is pretty much the last course of action a household in such a circumstance would take. And yet that is essentially what we did. The result: massive debt and an almost universal acceptance by the public that the debt had to be paid back.
Most people cannot imagine being Chancellor of the Exchequer but they do know what it’s like to balance the family’s budget. We should have framed the Conservative policy of cutting the national debt much more sharply than we would have done, as the equivalent of demanding a mortgage be paid off in one year rather than 20.
The Conservatives have cornered the market in prudence precisely because – ever since Margaret Thatcher made a political narrative out of being a grocer’s daughter, they have been able to frame the national economic debate in terms that resonate with people’s own experience of household economics. Odd really, given it is unlikely that there will be many similarities between the belt-tightening decisions in the millionaire households of the cabinet and those the rest of us are faced with.
Families understand the difference between “good” debt and “bad” debt. Being indebted for a sum equal to ten times your annual income is a worrying, but is seen as entirely acceptable if that debt is the mortgage for your family home. Racking up debts on a credit card fuelled spending spree is a short cut to financial ruin. By the end of the debate the public saw us armed with the nation’s credit card, not its mortgage statement.
Labour cannot duck the problem it has with debt. And it can no longer choose the easy option of spending rather than living within our means: debt has become, for this generation of Labour, what unilateral disarmament was for our predecessors in the eighties. It is a sign that we are out of tune with public concern. Anger and disquiet about the coalition’s cuts are genuine and deeply felt. But we would be wrong to assume that they mean the public don’t want the debt paid down. A shadow cabinet that rightly articulates the case against individual cuts that will generate the greatest social harm must also say more about the cuts we support.
Anger and resentment towards the coalition means that Labour ought to be able to look forward to some positive local election results this May. We can hope that this will see more councils led and run by Labour, even here in the south. That presents us with an opportunity: the chance to show that Labour is not just about shouting down the cuts, but that we are also credible on paying back the debt. Quality services do matter. Putting right the worst of the impact of the Coalition’s cuts locally is the right thing to do. But Labour could do much more on each of these fronts if councils were debt free. And if Labour is doing just that at a local level it will be much easier for Labour’s national team to argue that it will do likewise if we are returned to office.
This is Labour’s critical challenge – especially in the south – where voters tend to be more affluent, less reliant on public services and like politicians who they identify with value for money and prudent spending. Just as British voters have to watch the pennies, so too, should Labour.
Stuart King is a former Labour parliamentary candidate and founder of www.southernfront.org.uk
2010 was kinda a bizarre year for the mortgage market. In the first half of the year, you had a decent number of home sales keeping mortgages for purchases stable, thanks to the home buyer credit. In the second half of the year, that changed as demand crumbled when the credit was withdrawn. At the same time, you had very low mortgage interest rates throughout much of the year cause a mini-refinancing boom. 2011 will look very different, as the housing demand continues to struggle and mortgage interest rates have begun rising.
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