Friday, 2 December 2016

Labour is moving rightwards, not leftwards

The chaos and dissent so obvious within the UK Labour Party since its 2015 General Election defeat has helped to cover up its actual dearth of policies. It is by no means incumbent on any Opposition to put forward a fully-worked-out roster of actual plans, especially at this relatively early stage of a Parliamentary term. But so far little more than ‘anti-austerity’ rhetoric has emanated from the Party since its leadership upheavals in the summers of 2015 and 2016. Even more intriguingly, what details we are now getting suggest that Labour is merely drifting in policy terms, or even moving rightwards since end of Ed Miliband’s leadership. It is certainly not on the kind of left-wing trajectory that many members and supporters perhaps imagined when they signed up for Jeremy Corbyn’s leadership.

Labour’s sober demeanour is most obvious in the economics field. For one thing, Labour’s current overall posture on public spending might now be quite similar to Theresa May’s. John McDonnell (above), the Shadow Chancellor, has since March been committed to reducing the current deficit to zero over a five-year planning horizon. But given that Chancellor Philip Hammond has just announced that he is significantly loosening budgetary policy, and that the Conservatives seek to reduce the overall deficit to zero only at some unspecified point over the next Parliament, that may not in practice give Labour much more room than Mr Hammond when it comes to spending on health, education, welfare and the like. Here the Conservatives’ new post-Brexit realism has closed up much of what difference there was between the parties, a situation that could potentially get even worse for Labour. The Government’s plans are now extremely vague, lowering the political costs of further electorally-motivated changes in the future. If Mrs May and Mr Hammond decide to drop even this new pledge – and the Conservatives in office have torn up all the others – Labour could be left high and dry, committed to spending much less than the government, since they might not then have the political capital or time to row back on their own deeply confused and conflicted promise to be quite so prudent.

It is true that Labour promise to ‘carve out’ or exclude spending on capital investment from this rule. That might allow a Labour government a bit more leeway than the Conservatives on day-to-day spending if Labour did exclude such outlays from fixed expenditure limits: total government capital spending was predicted in last week's Autumn Statement to run at over £100bn in gross terms by the start of the next Parliament in 2020/21. If you leave that amount out of your balanced books entirely, you've got serious money to blow on the current side. But the amount available in practice is actually much lower. Mr Hammond has loosened budgetary policy to the extent where the net current projected surplus to help pay for all that capital investment in 2020/21 will 'only' be about £33bn. Since Labour's declared aim is balance on current spending, that's what they'd actually have to play with in year one.

It's also important that the Chancellor's new target is now a lot less ambitious than previously: he aims only to reduce the total deficit to 2% of GDP by that point. That might make available an extra £27bn over and above his existing plans, which at the moment tot up to a deficit of about 1% of GDP. That potentially reduces Mr McDonnell's generosity at the start of a Labour government to the gap between £33bn and £27bn: if the Conservatives do throw all of that war chest at winning a General Election, he'll only have a few extra billion to spend. That'll be nice to have, but it will not represent much of a shift that will be felt on the ground. It would then take some time for any difference to open up in practice rather than in theory, given both the longer post-Brexit timeframe the Government is now allowing to get to overall balance - and just how difficult and slow infrastructure spending usually proves to assemble.

Despite claims to the contrary by some Labour advisers, Mr McDonnell’s fiscal responsibility rule is not dissimilar to the platform Labour adopted under Mr Miliband and his Shadow Chancellor, Ed Balls. Labour do propose some technical changes that would ease spending constraints. There will, most importantly, be a 'zero bound knockout' rule that will suspend these budgetary targets if the Bank of England thinks that monetary policy can take no more of the strain involved in stimulating demand. Increasing the expected returns to investment might also justify more capital spending by boosting its projected returns. But the difference these changes would make to those cruelest and most deeply-felt cuts to the current budget – for instance, to local authority social care budgets – might prove low indeed during the first few years of any Labour government.

One could multiply these examples in most policy fields. The Government at the moment seems reluctant to guarantee the standing ‘triple lock’ on pensions increases, under which the basic state pension increases by the greater of price rises, wage increases or 2.5% every year. Mr McDonnell has now said that Labour definitely will commit to such a policy. Given the enormous progress made in reducing pensioner poverty over the past two decades, and the fact that older Britons are now one of the better-off groups in the population, using scarce resources to help richer citizens without any means testing seems like a bizarrely retrograde version of the Labour left's supposed redistributive politics. The same very odd logic holds when you look at tax policy, since the Shadow Chancellor has just agreed to back a large upwards shift in how much workers can earn before they are charged the higher 40% rate of income tax – another regressive measure, cutting taxes for the top 15% of earners, that Labour under Mr Miliband would probably have rejected.

Labour’s newly-regressive present stance can be seen in its depressingly hard-line attitude to state surveillance, since the Opposition just inexplicably waved through the new Investigatory Powers Bill – one of the most extensive extensions of government spying powers ever seen in the developed world. It is also clear in the party’s new attitude to Brexit: Labour members have been urged by Mr McDonnell, no doubt happy to see the repeal in Britain of European competition laws that rule out selective industrial assistance, to embrace what he portrays as Brexit's enormous and exciting opportunities. Labour’s conservatism now even seems to extend to a desperate search for a new and more conservative stance on immigration, since its spokespeople now seem to imagine local trade union bargaining on wages and working conditions as a way of reducing Britain’s attractiveness to migrants – yet another version of Mr Miliband’s face-both-ways emphasis on Minimum Wage enforcement and action on people smuggling during the 2015 election.

Why has Labour seemed to become if anything more timid, more conservative, under Mr Corbyn? There would seem to be four plausible explanations. There is, firstly, perhaps just the desperation that comes from looking at Labour’s dire poll ratings. They are further behind than any Labour Opposition has ever been at this stage of a Parliament, and they are performing much worse than they did even during the mid-1980s. May’s local and devolved elections, and council by-elections held up and down the country every Thursday, paint a similar – though perhaps not quite so bleak – picture. It may be that Labour’s employment of a new polling agency, BMG, has led to a sense of realism and pragmatism within the party’s General Election planning machinery. It is quite likely that they are just scrambling to get back to where they were in the last days of the Miliband interregnum.

The second potential cause of Labour’s new conservatism is the party’s sheer want of front-bench talent. Mr McDonnell, for instance, has little economic experience, has never been much of a diplomat, and has never served in front-rank politics before. Sometimes that sheer lack of practise gives him away, just as it did during the first days of his Shadow Chancellorship – when he signed up to George Osborne’s fiscal targets before being forced to back away from that commitment by howls of anger from within the Labour Party. He may simply not know that his macroeconomic policy looks rather like that adopted by Mr Miliband and Mr Balls, and is not all that immediately different from that offered by the Conservatives. He may not grasp that defending the pensions triple lock is basically a promise to fire off taxpayers’ money supporting inequality.

Another reason for Labour’s rightwards drift may originate within the Party’s ongoing – but now quieter – civil war. Mr Corbyn’s and Mr McDonnell’s enemies, having been frustrated in their post-Brexit head-on assault on the leadership, have now carried their resistance underground. Many Labour MPs are simply waiting, as they see it, for the new leadership team to implode under the weight of its lack of ability and the inevitable factionalism that will emerge on the Labour left. There are hints, much denied, of an ‘anaconda strategy’, gradually squeezing the life out of the Corbyn experiment by refusing to help in its painful day-to-day struggles. Within the party’s bureaucracy, the idea seems to have taken hold that Mr Corbyn may be unsackable – for now – but that Mr McDonnell certainly can and should be prevented from winning the leadership after Labour's likely General Election defeat. So the Leader and Shadow Chancellor are simply being left to get on with things, in the expectation that they will fail to carve out any new political space at all.

Fourth and last – though perhaps most disturbingly – is the dawning realisation among some Labour activists that this small-‘c’ conservatism is exactly what Mr Corbyn and Mr McDonnell want and represent. It is not a bug or a glitch. It is a key part of their programme itself. As inheritors of Tony Benn’s alternative economic strategies from the 1970s and 1980s, it might just be that this old-new Labour leadership prefers to adopt a cramped, shuttered attitude in an age when ‘open’ and ‘closed’ are more apposite descriptors for our politics than ‘left’ and right’. Narrow, nationalist, illiberal and autarkic, to this way of thinking a retreat from the EU, non-Keynesian economics that aim to change the structure of the economy more than the level of demand, increased reliance on interventionist policies at home, and a stronger state, are all more than congenial to a Labour Party that is trying to slough off its European social democratic clothes forever.

Much will depend on whether Labour’s rightwards course is being caused by electoral tactics, incompetence, internal politicking or an entirely new Labour ethos of nationalistic populism. The identity of the Labour Party is involved, to be sure, but also the future of the Westminster two-party system. The dangers Labour face cannot be overstated. Mr Corbyn and Mr McDonnell have allowed the impression to gain a hold, for more than a year, that they represent a decisively left-wing alternative to Conservative rule, principled as Labour politicians have seldom been in their opposition to austerity. Their poll ratings, and especially the numbers reflecting which main party is most trusted on the economy, have fallen accordingly. But now they risk giving even up their reputation even for intellectual probity – for ‘saying what they think’.

Just as the Conservatives risk much if their new Eurosceptical image turns out to be false or misleading, so in this way Labour could alienate its last bastions of support: public sector workers, older left-leaning voters now prepared to take a fresh look at Labour after what they perceived as the ideological betrayals of the Blair years, pro-Europeans, students, cosmopolitan urbanites and younger – but economically increasingly marginalised – middle-class professionals. British politics is in near-unprecedented flux. During this of all times, Labour seems determined to flirt with its own extinction as a national party of government at Westminster. Strange days indeed.