The Failure Of Austerity - A Lewisham Perspective

A few people have asked me about the speech I made during the debate on the setting of Lewisham Council’s Budget at last week’s Council Meeting. I tend not to write down my speeches so I give below my best recollection of the main points I made.

Prior to the election in 2010, Council Officers were working on three potential cuts scenarios for the 2010-14 Council administration, depending on who won that Election. The optimistic scenario involved £20m worth of savings, the middle was £40m and the pessimistic, based on a Conservative victory with its pledge to eliminate the deficit by 2015, was £60m worth of cuts. However, as was known since the 1930s, Austerity in the public services during a recession when the private sector is on its knees is self-defeating, as one man's spending is another man's income. And so it has proved to be under this government. If you want proof that Austerity has failed, look at the Council's Budget. Because the Tory-led government deficit reduction plan has failed, George Osborne has had to increase public spending cuts year after year. For Lewisham, this has meant instead of making £60m worth of cuts in 2010/15, we have had to find £93m worth. For 2015/16 we need to find a further £40m. Then, between 2016/18 we need to find another £45m. That's £178m in total, or almost three times the original amount. This is more than we spend on Adults and Children's Social Services combined. Yet despite this lamentable failure of Tory economic policy, we in the Labour Party have been made to feel ashamed of our own record of managing the economy when we were in office. We now believe the myth that the deficit was caused by our profligate spending. So, in this General Election campaign, we seem almost embarrassed to ask the electorate to vote for us. We approach voters apologetically, asking them to give us their votes because we can be trusted more on the NHS than the Tories and if they are willing to turn a blind eye to our record on the economy, we will throw in the abolition of the bedroom tax as a bonus. Rather than pouring money down the drain when we were in power, we invested wisely in our hospitals, schools and other public services, putting right years of neglect under the Tories. And it comes as a surprise to many, even in our own party, that debt as a percentage of GDP was lower in 2008 than it was in 1997. Debt was lower under Labour going into the Great Recession than it was when the Tories left office. Yet many will recall how leading Tories in the early years of the last Labour administration claimed credit for Labour's early economic achievements, claiming that they had left Labour a wondrous economic legacy. The fact is that the deficit was created not by Labour's unfunded spending plans, but by the collapse in tax receipts that followed the Great Recession, an economic disaster that was conceived, designed and built by the private sector. So let us not approach the electorate hoping that they will forgive us our past sins and take pity on us. Instead, let us fight this election with confidence, proud of our record on the economy. Let us tell the voters that a Labour government will not just build a fairer, kinder Britain, but a Britain that is dynamic and prosperous as well.

Will Austerity Cost Labour Dear?

It appears that the rise of the SNP in Scotland is going to cost Labour seats at the forthcoming General Election. Scottish voters don’t want Independence from the rest of the UK, but they appear to want to be governed by a party dedicated to bringing this about and to send its members to represent them in the Westminster Parliament. Maybe some are doing this out of guilt because they just couldn’t bring themselves to vote Yes in the referendum, even though a sense of romantic nationalism made them feel that they should have done so. If former Scottish Labour voters planned to vote SNP in May out of a combination of nationalism and guilt, they now have an added motivation. A few weeks ago SNP leader Nicola Sturgeon attacked Westminster’s ‘morally unjustifiable’ Austerity policy. Her intention was to focus the spotlight on Labour for not being anti-Austerity enough, arguing that with a hung Parliament being the most likely outcome of the Election, a strong SNP presence in Westminster was the only thing that would force Labour to break up the ‘cosy consensus’ around Austerity that existed amongst the major parties. With the SNP now campaigning on an anti-Austerity ticket, one wonders what Jim Murphy, Labour’s leader in Scotland, can do to create a Unique Selling Point for the party north of the border.

But the SNP is not the only anti-Austerity party causing problems for Labour. Although the SNP is threatening 20 Labour seats in Scotland, south of the border it’s the Greens that are the headache. A surge of support for the Green Party, Natalie Bennett’s media meltdown notwithstanding, amongst disaffected former Lib Dem voters and other left leaning people, especially the young, students and first time voters, could prevent a Labour victory in 22 seats.

Why has the Labour Party got itself into this position? Ed Balls' current pronouncements on Labour Economic Policy stand in stark contrast to his 2010 Bloomberg Speech, a speech to which the economist David Blanchflower tweeted the link a few weeks ago, hailing it as one of the most sensible things anyone has said about the Great Recession. Anyone who read that speech, entitled ‘This is an alternative’, (here, still on his own website, or here if you fancy watching the man in person delivering it on YouTube) could reasonably be forgiven for expecting a more anti-Austerity policy from Labour in Opposition when Balls became Shadow Chancellor.

Many independent commentators describe the plans of political parties to implement more cuts in the next Parliament as unfeasible. My favourite description is the one used by the blogger @FlipChartRick who says that those who believe that these proposed cuts are deliverable are living in 'LaLa Land'. I am sure this will prove to be so.

The Labour Party has made much of the fact that the Coalition has made sure that the cuts to Local Government fall disproportionately on the neediest communities, such that a list of those Councils experiencing the worst cuts reads like a roll call of the most deprived places in the country. These are, of course, Labour areas. Those of us who are elected Labour politicians tasked with delivering local services would like to know, having raised this issue, what a future Labour Government plans to do to address it?

It seems that few people in national politics know very much about Local Government finance, DCLG included. Few people understand that we are responsible for delivering the second pillar of our national care service, social services. The UK is the only country in the world where this is the case. In Lewisham, in common with many other authorities, we spend half our budget on adults' and children's social services.

In a recently published report entitled Financial Sustainability of Local Authorities, http://www.nao.org.uk/wp-content/uploads/2013/03/Local-Authority-Full-Report.pdf the NAO, with mild understatement, essentially concludes that the DCLG don’t know enough about the finances of individual Local Authorities to understand their capacity for implementing further cuts. They highlight the consequent risk of what they euphemistically refer to as 'service pressures'

The House of Commons Committee of Public Accounts goes further. In their recent report of the same name, Financial Sustainability of Local Authorities 2014, http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/report-financial-sustainability-of-local-authorities/, they say,

'Furthermore, if funding reductions were to continue following the next spending review, we question whether the Department would be in a position to provide assurance that all local authorities could maintain the full range of their statutory services.'

Lewisham Council’s Chief Executive, Barry Quirk, has an insightful take on this here, http://www.lgcplus.com/Journals/2015/01/16/y/d/s/not-even-wrong.pdf

In short, if the next government does not call a halt to the further Austerity planned for Local Government, at least in the short term, Adult and Children's Social Care Services will fall over. Pretty much everyone, it seems, working in this sector, officers and politicians alike, understand this. This will mean that elderly people will not receive the basic care they need and will not be able to provide for themselves and that children will not get the Child Protection Plans they need. I think that every Authority in the country is like a car heading towards a cliff edge. We are all desperately trying to slow down but know we can't stop. All we can hope for is that we are not the first one to go over the edge. Yet we are in the moral dilemma of wishing that one of our neighbours goes over the edge soon because this is the only way we believe that common sense will prevail and the cuts will be reversed.