EU Referendum: President Obama Does Us All A Favour

Am I the only one who thinks that until fairly recently we heard a lot more from the Leave campaign in the reporting of the coming EU? Has anyone heard from Alan Johnson lately? Wasn't he supposed to be leading the Remain campaign? And what have we heard from the Leave campaign? To my mind its been a non-stop comic display of jingoistic wishful thinking and childish naivety. The plan seems to be that we will leave an alliance of 28 nations, comprising over 500 million people and generating nearly a quarter of global income and go and do better for ourselves on our own. We will do this by wrapping ourselves in the Union Jack and going to other countries like the USA and China and negotiating treaties that are on terms that will be entirely the ones we demand. And why will these countries give us exactly what we want? Well, because we are the fifth biggest economy in the world, have the fourth biggest military, countries will lose out if we close our markets to them and, and, and, 'Well, by Timothy we are British for goodness sake!'

Such run-away self-confidence was dealt a bit of a blow last week when President Obama put us in our place. He had to point out the bleeding obvious. We are not as important as we think we are. If we leave the EU we will not be at the front of the queue to sign a trade deal with the US. It may take 5 to 10 years for the US to get around to seeing us. Oh dear. But look on the bright side. Maybe President Trump or President Clinton II will call us in from the waiting room a bit sooner. Or maybe not. Obama's reward for calling us up from planet earth was to predictably reap a storm of protest and abuse from the Leavers. Boris Johnson suggested that the President was simply prejudiced against us because his Kenyan father had been opposed to British colonial rule. Although Johnson has been criticised by his own side for his intemperate remarks, I thought that he was putting the weakness of the Leave case very well. I am not suggesting that Obama is anti-British, but when you are negotiating you should assume that your opposite number is not on your side, favours their interest above yours and, yes, may dislike you.

It is thought by some that in 1945 at the end of WWII when the Liberation of France had only been possible because of the support and sacrifice of the Allies, General Charles de Gaulle said to Churchill, 'We will stun the world with our ingratitude'. Whether he said it or not, few would say he ever displayed any. What's more, he went on to veto the UK's application to join the EU, or the EEC as it was then called, not once, but twice (in 1963 and again in 1965). Clearly, he wasn't impressed by any of the UK's arguments for joining. He may not even have cared that UK membership would have improved French prosperity. He may have just been content with the situation where the EEC was a club run by West Germany and France for their benefit and seen British membership as a threat to this position. Better to be one of 2 equal partners in a club that was doing alright than 1 of three bosses in a club that was more prosperous overall, but where you ran the risk of the other two ganging up against you. I am not sure whether this attitude could rightly be described as prejudice but it certainly provides a cautionary tale against those who feel that they can get others to see their point of view and consequently act in their interest, even if they believe they have interests in common. I think you'll find its a bit more complicated than that. 

Roger Scruton wrote a book entitled, 'The Uses of Pessimism and the Danger of False Hope'. In it, he cautions us to be on our guard against those who encourage us to reject an imperfect and irritating reality and embrace instead a far better theoretical alternative. We should resist those who tell us that, if only we could summon up the courage to breakaway from the constraints of our own making, then we would be free to run to the sunny uplands of a brighter, better future. The Leave campaigners obviously haven't read this book. I think I even heard one of them talk on the radio about the 'sunny uplands'. The Leavers are so intoxicated with this idea of being 'Free At Last! Free At Last!', that any attempt to point out the downside of leaving is met with the the charge of 'scaremongering!'

My biggest fear if we leave the EU is that the EU will still exist. What's more, it will not remain set in aspic. What will it be like in 5, 10, 20 years time? When it comes to the future we only 'see through a glass darkly'. It is possible that in my lifetime (I am 50) the EU could open its doors to membership for Ukraine (population 45 million), Turkey (population 79 million), Belarus (population 10 million) and perhaps even Russia (population 144 million). What would such a huge expansion and geo-political shift mean for the EU's world view and priorities? How would such a vastly changed alliance view the UK and its interests? What's more the issues that I think have generated such dissatisfaction with the way things are of which the desire to leave the EU amongst some is a symptom, will not go away if we Brexit. Falling living standards for the majority of working people, increased debt, mass economic migration driven by war and poverty, globalisation, terrorism and religious fundamentalism, all will be unchanged the day after we leave. Brexit will not isolate us from mainland Europe and insulate us against our problems. On the contrary, I think it will expose our weaknesses. For example, the reason we export so little to non-EU countries (and EU countries for that matter) is not because of Brussels bureaucrats. It is because we have such a small manufacturing industry. This is due to decisions that successive UK governments have made which have led us to build our economy on financial services, shopping, property and private debt rather than making products that people want to buy. British people may fear that illegal immigration is getting out of hand, but you only need to have driven through the port of Calais regularly over the last few years to see the enormous resources that the French have invested to try and stop them getting through. They may have done an imperfect job in fulfilling their treaty obligations to a fellow EU member, but it is hard to believe that they would do a better job of protecting the borders of a non-EU member just because we told them to and said that we would be very cross if they did not.

So, thank you President Obama for giving us a much needed dose of reality. Let us stick with our EU partners present and future. Let us remain within an imperfect organisation that has lost its way for the moment on economic policy and is struggling to work together to deal with the fall-out from foreign conflicts. We should work together to make things better for all European citizens and not turn our back on our duty to do so in favour of a short-sighted petulant leap in the dark that risks our children's future.

School Academisation: A Lewisham Perspective

Here is the text, slightly edited, of a letter I sent to Nicky Dixon, a Lewisham resident, mother of two children at Lewisham schools and a member of the NEC of the Campaign for State Education (CASE).  Nicky has kindly agreed to let me post it on my blog as she agrees with me that others may find it of interest.

Dear Nicky

Thanks for your email. I think there is considerable justifiable concern about the Government's intention to turn all schools into academies by 2020. I am sure you won't be surprised when I say that you are not the first person to ask me to outline the Council's position on this issue. You are right to say that the Mayor has set up an Education Commission. It's job is to provide him with independent, professional advice on the best way forward for education in Lewisham. It's remit is not exclusively about Academisation but I am sure that they will address the issue. I am also sure that the Mayor will want to wait to receive their advice before making any new policy statements. However, this is not to say he has no view. Here is what he said in his speech at the recent Council AGM:

'Two years ago we set out to improve outcomes from our Secondary schools and to deliver enough primary places to meet the needs of our growing population. So far we have achieved the second of these but with growing difficulty while the first is a work in progress. 

We have established a Commission of experts to look at the performance of our schools and to make recommendations to us about what we need to do secure improvement. It will report shortly. 

When we consider its advice we will need to do so against the background of impending legislation to turn every school into an Academy and remove it from the Local Authority family of schools. Many of us take the view that this is a policy which derives from ideology not from any consideration of the evidence. We hear minsters attempt to justify it by reminding us that it was a Labour Government which first introduced academies. 

And so it was – but they were expressly intended as a way of achieving improvement in schools which were experiencing significant failure. We now have a policy which is designed to lead to all of Lewisham’s primary schools becoming academies – despite the fact that we have some of the best performing primary schools in the country. 

There will be opposition to this legislation and I have no doubt there will be fierce debate and efforts made to remove the worst parts of the bill. It has been encouraging to hear even Conservative councillors making clear their opposition to this. 

But this government has been democratically elected and is entitled to act on that mandate. Those of us who disagree with a given policy should say so and explain why but equally those of us who hold elected office must also examine the potential impact such legislation will have and prepare to deal with it. 

Nor can we wait until the legislation passes before acting – we will need to talk to those who are currently involved in delivering education in Lewisham about how we can work together to sustain the positives we now have while making ready to deal with the consequences of legislation. 

The co-operation between our schools has been a great strength in this borough and I hope we can use that strength to find local solutions to a changing situation rather than sit back and let Academy chains which know little of our community pursue a piecemeal approach.'

He was also clear when the Leathersellers' expressed their desire to convert their three Lewisham schools into an academy, that he was unclear what they believed they would achieve by doing so. He also made clear his view that he believed that their priority should be school improvement, that Academisation was no guarantee of this and that he feared that the pursuit of this organisational change risked causing a distraction that would undermine efforts to improve education outcomes for pupils.

The Council's position is ultimately a matter for the Mayor but I would as the Lead Member just make a number of points, some of which expand on those expressed by Steve. Firstly, I think it is generally accepted by many, regardless of their political persuasion that, to borrow a phrase from Christine Blower, the General Secretary of the NUT, based on the evidence, Academisation is not a school improvement strategy. The recent report of the cross party Education Select Committee came to the same conclusion, although they expressed it in a more measured way. (As an aside I found it interesting that the report went out of its way to record the view of a number of witnesses that appeared before them, who were at pains to point out that Local AuthoritIes had not run any schools since the Baker reforms of the 1980s. I suspect that the motivation of these witnesses was to counter the view of many people, including the former Secretary of State for Education, that interference by Local Authorities is to blame for failing schools. No doubt the impetus for Academisation stems from this erroneous view and the mixed record of academy schools bears this out)

Secondly, 6 years of large cuts to Council budget, plus 4 more to come, means that the Council's capacity to fight the policy of a democratically elected national government has been much reduced and will decline further. Moreover, this is not a situation like the threatened closure of Lewisham Hospital's A&E, where we had a strong case to argue that the Secretary of State has acted ultra vires, as the result of the court case demonstrated. Every pound spent on lobbying is a pound taken away from front line services.

Having said this, it is clear that there isn't unanimity of view on forced Academisation on the Tory benches in Parliament. I followed the recent debate on the subject with interest. Given that the Government only has a working majority of 18, it is unclear to me that any vote on mandatory conversion of all schools by 2020 would be passed. 

However, as you point out, regardless of this, Regional School Commissioners have powers to issue academy orders. To answer your specific question, our Commissioner hasn't issued any. It is hard to predict the future with certainty but, if he were to do so, it is hard to envisage a set of circumstances where we would be able to effectively oppose this.

Moreover, the government and the Commissioners are not the only driver of Academisation. Schools are free to apply to convert should they wish to do so, as our experience with the Leathersellers' demonstrates. Going back to the point I made about the Education Select Committee, the Council doesn't run any schools and hasn't run any schools in the way that many people think we do, for decades. In addition, the drive to Academisation has been given fresh impetus by the changes to schools' funding that the government are enacting. The government decision to implement what it calls 'fairer' funding for schools is going to redistribute funding away from inner city, urban schools to schools in more rural areas. It is estimated that this will reduce the funding for Lewisham Schools by more than 10%. On top of this, schools are facing increased running costs. So, regardless of Academisation, it is likely that primary schools, especially smaller ones, would have to come together in some way, in order to share management overheads. This is obviously going to fuel interest in the move towards primary schools combining to form Multi Academy Trusts.

In this response I have tried to set out the landscape in which the Council finds itself as it seeks to make Lewisham the best place to live work and learn and, in particular, to drive school improvement, as much as it is able to do so. I hope it has been helpful.

Can The Labour Party Select Winners?

I recently heard a recording of Denis Healey saying that he thought that politicians who were only interested in politics made bad politicians. He pitied people who had no life outside politics and said that his real life had always been in the arts. There is a story that I have heard that in Norway they select their local politicians in the same way as we select people for jury service. I don't know if this is just another, 'I heard it from a man in the pub' story, but, in my experience, there is certainly something to be said for this idea. The serious but largely mundane business of government is something that is far too important to be left to people who think they want to do it. Far better, perhaps, to pick a random selection of ordinary people who would much rather be elsewhere doing something else, present them with the facts and get them to make a decision, the only proviso being that it had to satisfy the 'Welfare of the People above all' test.

The Labour Party prides itself on being far more diverse and reflective of the communities it represents than the Tory Party. A cursory glance at the 53 councillors that make up Lewisham Council's Labour Group would confirm that we have a good mix of women, people from ethnic minorities and people from the LGTB community. However, there are very few people under 35, who have children of school age, or work in the private sector, for example. Ben Judah, in his recently published book on London, makes the point that 55% of Londoners are not white British, nearly 40% were born abroad and 5% are living here illegally. I think in Lewisham, and, I suspect, everywhere else, Labour is far less representative of the community it serves than it thinks. Can we really be confident that we are governing in the best interests of the people when our life experience are so different from theirs?

This state of affairs wouldn't be quite so bad if we were doing something about it. Sadly, we seem to be making matters worse. Rather than encouraging Councillors and Labour members to be active in their communities, we are making more and more demands on their time. I have noticed this in the 20 years that I have been a Labour Party member. When I was approached to be a candidate in the local elections, the fact that I wouldn't have to do too much if I didn't want to if successful, was put to me as a selling point. Since then everything has become more corporate and professional. And a good thing too in many ways. However, I think things have gone too far.

The Labour Party is now on a constant war footing. We are continually campaigning and canvassing throughout the year. No sooner had we finished campaigning for our own local elections in 2014, then it seems that we were gearing up for the General Election in 2015. This was swiftly followed by the campaign to elect the new leader and deputy leader of the party, then the campaign to select the Labour candidate for the London Mayoral Elections and now the London Mayoral campaign itself. It's not much of an exaggeration to say that you could spend every night of the week and every weekend at some kind of Labour Party meeting, or out campaigning, or at a Labour Party Fundraiser of some description. And the sad fact is that if you don't, you have little chance of advancing up the greasy pole. The sheer effort, time and commitment required to become a Labour candidate in some election or other, with the exception of Council elections in some cases, is now so great, that if you were a normal person with a normal life outside politics when you started, you won't be by the time you have become successful. Labour politics is not something that can be pursued alongside other interests, not to mention family commitments. Perhaps it was ever thus. Clearly, Denis Healey thought and acted otherwise.

Labour recognises that it is on a quest for relevance in the eyes of ordinary people. It seeks the holy grail of our age, Authenticity, as it tries to come up with a plan to win in 2020. Jeremy Corbyn's massive victory in the leadership election and the huge increase in Party membership that accompanied it, are seen by many as evidence of Labour's reconnection with the people. Labour's subsequent steady decline in the opinion polls tells another story. My fear is that if Labour does manage to find leaders with the common touch, people who can convince voters in constituencies that we need to win in order to form a Government, to vote Labour, this will have to be by luck rather than design.

What Is The Moderate Labour Message?

John Harris' article in last Saturday's Guardian asked, 'When are Labour 'moderates' going to do more than moan?' It was a call for Blair-Brown pragmatic centrists to set out some concrete, forward-thinking policies rather than analysing the reasons for Labour's 2015 General Election defeat, pontificating on the Party's current predicament and speculating on who might be a post Corbyn era electable leader. I would add that it might help if supposed mainstream moderates would stop prioritising their Pavlovian rebuttal of any criticism of the last Labour administration's record in the wars in Afghanistan and Iraq. Nothing is more certain of getting a response, and a sharp one at that, from a 'moderate', than an expression of anything less than fulsome support for the Iraq War, especially if it's from another perceived sound moderate who is held to be someone who 'should know better'. I don't want to get into a debate on whether these military interventions were right or wrong. I simply express surprise that those who call for the party to concentrate on the centre ground and what really matters to ordinary people rather than obsessing about the ideological preoccupations of the radical few, appear to be the first to ignore this advice when it comes to the Afghan and Iraq Wars. I think it's fair to say that the majority of British people think that, at worse, the wars were a mistake and, at best they would rather forget all about what they feel was and continues to be a very sorry business. In such circumstances, you would think that the true political professionals on the centre right in the Labour Party who are serious about the acquisition of power would be seeking to close down the debate on this issue and move the discussion on.

It's now popular to say that Ed Miliband was a terrible leader of the party and never had a hope of becoming Prime Minister, but this is exactly what he tried to do. Speaking at his first Party Conference as leader in 2010 he said:

I criticise nobody faced with making the toughest of decisions and I honour our troops who fought and died there. But I do believe that we were wrong. Wrong to take Britain to war and we need to be honest about that. 

Again, whatever one thinks about the War, this can be seen as a genuine attempt to draw a line under the issue as an unwelcome distraction in order to enable the Party to move on to more politically fertile ground where it could finally breathe some fresh air. Surely this course of action would have been the wise advice of any impartial, objective campaign manager who saw it as their job to win elections. To his credit, Miliband the Younger then did try and move the debate on and tried to raise the issue of growing inequality of income and wealth. His characterisation of the 'squeezed middle' may have initially attracted ridicule but it has now become a mainstream concern with that pillar of fiscal rectitude the IMF, no less, citing it as a drag on global economic growth.

There are plenty of things that Labour moderates can raise to engage voters and Harris points to Tristam Hunt talking about inequality and Chuka Umunna talking about electoral reform. I noticed this good article by former Shadow Work and Pensions Secretary and Lewisham girl, Rachel Reeves, on the dangers of rising private debt and the need to reform the tax system to deal with the inequality that exists in tax reliefs applied to savings that favour the well off. The arguments for dealing with inequality that are most likely to gain the most traction with the electorate are the economic ones rather than those about fairness. Pointing out that inequality keeps us all poorer is harder to rebut than seeking to appeal to our notions of right and wrong. The call to reduce inequality in order to increase economic growth and address what's been described as secular stagnation gives Labour a chance to park its tanks on the Tories' lawn. 

It is a shame, given these opportunities, that the moderates seem to have devoted more energy to defending Blair's record in Iraq than defending his record on the economy and management of the public finances. Consequently, the battle against self-defeating Austerity has, bizarrely, been left to the Corbynistas. The recent floods, whilst terrible for those suffering their indiscriminate effects, have been an absolute gift for any pragmatic centrist who wanted to appeal to all sections of the Party and the country by arguing for the need for an interventionist state and increased levels of public spending to 'fix the roof' when the low interest rate environment 'is shining'. (see here, here and here for example)

Rather than complain that Corbyn is a disaster and speculate on which 'moderate' from the PLP should succeed him when the time comes, perhaps all of us pragmatic centrists should concentrate on saying something that might have a chance of engaging the interest of people who didn't vote Labour last year.

PS It was nice to get such a good response when out yesterday telling commuters about Sadiq Khan's pledge to freeze bus and train fares if he is elected the next Mayor of London.

Jeremy Corbyn Is My Leader Part 2

Oh dear. I have just reread a post I wrote straight after the General Election defeat. How depressing. Here's the last paragraph:

As it is, Balls is out of the picture and with his departure so goes probably the most high profile figure with a clear connection to the Blair/Brown/Iraq War/Financial Collapse Labour government that so many people obviously found so toxic, even if unfairly. Perhaps now, the decks are clear for a new beginning and an abandonment of the ‘AusterityLite’ economic policy. One question remains. Are Labour Party members, politicians and the unions capable of identifying someone who is capable of gaining traction with the public sufficient to win the next General Election and, even if they were, would they be willing to give them the job? Or, when it comes to electing leaders, is the Party’s natural response to pick people whose greatest talent is the ability to concede defeat gracefully?

Jeremy Corbyn Is My Leader

When it comes to modernity in general and the Labour Party in particular, I usually find myself out of step with popular sentiment. So, it came as no surprise to me that, when the results of the Labour leadership election were announced last weekend, I found out that I had backed the candidate who had come last. I am now officially one of the '4.5 percenters', that is, one of the 4.5 percent of people eligible to vote who backed Liz Kendall. It didn’t end there. Predictably, I backed losing candidates for the deputy leadership and the London Mayoral elections, Caroline Flint and Tessa Jowell respectively. I don’t wear my facility to gravitate towards minority positions with pride, rather with a sense of bemused resignation. The reason I put up the 4.5 Twibbon was not an act of defiance, but just a small act of solidarity, like turning on a torch in a dark landscape. The purpose is not to create a signal to steer by, but just to let others know that you are there and that they are not completely alone.
 

I didn’t support Liz Kendall because she was the right wing candidate. I supported her by a process of elimination. I thought that the Shadow Cabinet of 2010-15 were woefully disappointing. I have written a number of posts bemoaning the fact that Labour didn’t defend its record on running the economy in the Blair-Brown years and didn’t oppose self-defeating Austerity. So I wasn’t going to give my first preference to any former member of the Shadow Cabinet. That left Kendall and Corbyn and, not being someone of the far left, I felt Liz was my natural choice. I pledged my support for her early on, as the anti-Labour establishment, centre-right, at least to the right of Jeremy Corbyn (which granted isn’t saying very much!) candidate. However, I soon became exasperated as her attempt to appeal to Tory and Ukip voters manifested itself as being more down on the deficit than George Osborne and endorsing the crazy idea that we need to run a surplus on the public finances in this parliament. Indeed, I told a Liz Kendall campaign worker, who rang me up asking for my support, in a very theatrical fashion (it had been a long day), that under no circumstances would I support a candidate who talked what I considered to be a load of rubbish about Austerity and running surpluses. To which he replied that he knew it was rubbish as he had studied economics, but it was felt that this was the politically sensible thing to say. How depressing, I remember thinking.

Meanwhile, Jeremy Corbyn was busy going around opposing Austerity and the deficit fetishism that cuts public infrastructure spending at a time when it should be increased. A lot has been written about ‘Corbynomics’ and Corbyn’s ‘People’s QE’. I would simply say that you can’t dismiss the idea that the Bank of England should print money and give it away to ordinary people to help stimulate a flagging economy because it’s put forward by a mad, bearded leftie, when the idea has been endorsed by such doyens of the left as monetarist economist beloved by Thatcher, Milton Friedman, economist and former Chair of the Federal Reserve Bank, Ben Benanke and former chair of the FSA, Lord Adair Turner, to name but a few. So as the campaign progressed, I found myself in the deeply ironic position of supporting the most right wing candidate whilst agreeing with the most left wing candidate on matters of economic policy.

Well, as we found out last weekend, Jeremy Corbyn won the leadership election by a landslide and we are still experiencing the reaction. Former Shadow Cabinet members were queueing up to announce that they wouldn’t serve under Corbyn, or what Diane Abbot quite cleverly described as their rejection of job offers they hadn’t received. The Tories are working out how best to publicly engage with New Left Labour. The media are alternately poking fun, manufacturing outrage and causing embarrassment and discomfort. Fair enough. Other ordinary Party members, including many elected councillors who owe their position on councils up and down the country to their support of the Party, who were part of the Anyone But Corbyn fraternity, together with many Labour voters, are considering what to do next. 

I was particularly struck by this piece from Nick Cohen in the Spectator who announced that following Mr Corbyn’s election as leader of the Labour Party, he was resigning from the Left. It was a very interesting and engaging piece, written with real passion. He was particularly exercised by what he considered to be the hypocrisy of Corbyn and those who supported him. He cited their supposed commitment to equal rights for women against they unwillingness to speak out against the oppression of women in Muslim countries. He also raged against the fact that, in his opinion, despite their anti-racism, they are friends with anti-Semites, presumably because of their Pro-Palestinian/Pro-Arab idealogical position.

However, when I finished this piece I found myself thinking, ‘well, how many ordinary Tory and Ukip voters would care about any of this stuff?’. I use the phrase, ‘care about’ as shorthand for meaning, ‘if asked by a reputable polling company how many floating voters would rank any of these issues in their top 20, let alone their top 10, list of matters that most concerned them’. Or, alternatively, ‘would you decide who to vote for based on what the parties said on these issues alone’. I think that, at best (or worst, depending on your point of view) we could say concerning the issues of gender equality, the Middle East and 9/11, that people when deciding how to vote, would describe them as matters for consideration rather than determining factors. So they are not issues on which Labour can win an election. But they are the issues an obsession with which can prevent Labour from winning a General Election as it demonstrates to people just how out of touch and downright weird the Party is.

For the people of Britain to decide at the recent General Election that they were safer in the hands of the Bullingdon Club than the Labour Party should have been an incredible achievement. Labour’s lack of relevance seems to make it look like it was inevitable with hindsight. We will have to see how successful Labour under Corbyn is at turning this around. Sadly the first signs are not good.

PS. I just wanted to say a word about the promotion of Heidi Alexander, MP for Lewisham East, to the role of Shadow Health Secretary. I have known Heidi for well over 15 years, even before she was first elected to Lewisham Council. Heidi is not of the Corbyn left. It must have been a difficult decision to accept the call to join the Shadow Cabinet when it came, especially when other more experienced people were deciding to spend more time doing other things. Heidi is not a giver-upper, to quote my Father-in-law and she possesses a steely determination. She also has a huge sense of responsibility. I know that when a call came to do a difficult job, she would be the last person who would say that she was washing her hair. Everyone in Lewisham who has ever had anything to do with Heidi knows that above all her talents one thing stands out and that is her genuine concern for ordinary people. She has a big heart and I wish her well at this difficult and challenging time. One thing’s for sure, I wouldn’t want to be in Jeremy Hunt’s shoes.

Three Cheers For Yvette Cooper!

Or, 'I am an Economist and I am here to help'.

 

This week I was pleased to hear Labour leadership contender, Yvette Cooper, cautioning some members of the Party against ‘swallowing the Tory manifesto’. This is being interpreted as a criticism of rivals Andy Burnham and Liz Kendall, who appear to be keen to admit to Labour’s past mistakes in office in an attempt to capture the electoral centre ground away from which Ed Miliband moved the Party.

I have written before about how disappointed I have been by Labour’s unwillingness to defend its record on managing the economy and the public finances during the Blair-Brown administration against Coalition charges of profligacy (‘failing to fix the roof when the sun was shining’, etc). I was consequently shocked when potential leadership candidates appeared to be falling over each other to criticise Labour’s poor economic management and embrace the new Tory fiscal orthodoxy. Here’s Andy Burnham saying that Labour ran deficits that were too high. And here’s Liz Kendall going even further, declaring that Labour should run a budget surplus in future. There can be little doubt that if Chuka Umunna was still in the contest he would be saying much the same, as he was reported to have received the ‘hairdryer’ treatment from Gordon Brown when he criticised Labour’s economic record in office and accused the Party of being in ‘deficit denial’ in September last year.

Perhaps Cooper wasn’t focussing on this when she made her ‘swallowing the Tory manifesto’ jibe, but had in mind the calls from some in the Party for an EU referendum, more talk of aspiration and less defence of those at the bottom on benefits. Maybe I will be confounded when she comes out and says we need to run a budget surplus to keep the public piggy bank topped up for a rainy day. I say confounded because, unlike her leadership rivals, she did study Economics. In her case it was PPE at Oxford. This is in contrast to Andy Burnham, who read English at Cambridge, Liz Kendall, who read History, again at Cambridge, and Mary Creagh who read Modern Languages at Oxford (Chuka Umunna studied Law, not at Oxbridge, so I don’t think he would have been allowed to be Prime Minister anyway).

Sadly, it now seems that you can’t say you studied Economics, like I did, and expect people to think you know anything that they do not. This is in contrast with people who studied sciences, Law, Medicine, Accountancy or Engineering. People may have a low opinion of English and History but they would expect Andy Burnham to know about some books that they hadn’t read and Liz Kendall to know some stuff about a particular bit of the past that they didn’t. What’s worse is that most people seem to think that what Economics teaches you is wrong and should be ignored. Which is not surprising, because so much of what you learn is counter-intuitive and appears to contradict common sense. Moreover, it can be an affront to what people believe to be morally right. For example, Economics teaches you can generate a better outcome for society if polluters pay for the right to pollute, rather than if they are fined when they do, providing the money goes to compensate those who suffer the harm.

The debate on economic policy has been almost entirely captured by those who advocate the paradigm that the public finances are just like that of a household. You can’t spend more than you earn indefinitely. You cannot keep on borrowing. You will have to pay your debts back eventually or you will go bankrupt. If you spend more than you earn, then you need to cut your spending. This was the orthodoxy that prevailed before WWII and prolonged the economic crisis after the Wall St Crash in 1929, creating the Great Depression of the 1930s and brought Hitler to power in Germany. The great triumph of the economist John Maynard Keynes was to get the Very Serious People to accept that this household pocket book approach to running the public finances was wrong. To do this, he identified the concept of the ‘Paradox of Thrift’. He demonstrated that although thriftiness, or saving, was generally accepted as being a good thing, in certain circumstances it could have bad consequences. This was because if the economy was depressed, then savings wouldn’t get spent on investment so the more savings rose, the less people would spend. This meant that as one person’s spending is another person’s income, the economy would just get more depressed. He argued that in these circumstances, that is, in recessions, Governments needed to keep their spending up to take up the slack in the economy until such time as private sector confidence returns and people start spending and investing again. This ‘counter-cyclical’ view of Government fiscal policy held sway from after WWII until about 1980, when it was supplemented by free-market monetarism. The triumph of this new free-market credo which, incidentally, ushered in a period of slower growth and rising inequality, culminated in the private sector banking crisis that led to the Great Recession in 2008.

It should be said that Keynes thought that Governments should generate budget surpluses when times were good to offset the deficits it needed to run when times were bad. Perhaps he was being too cautious. The ratio of UK Government debt to GDP stood at around 240% in the late 1940s as a result of the costs of the war and then the setting up of the Welfare State by the post 1945 Labour Government. This ratio was brought down to less than 50% by the mid-1970s, not by successive Governments running budget surpluses, but by the eroding properties of inflation and economic growth.

In fact, despite what common sense may suggest and moral outrage demand, it is possible for the Government to run a Budget deficit indefinitely whilst at the same time reducing overall Government debt as a percentage of the economy. Here’s an example:

Year 1 GDP = 100 Govt Debt = 50 so Debt to GDP ratio is 50%. Govt is running a deficit of 1.

If we assume that inflation is running at 2% and real GDP growth is 3%, then the economy will grow in money terms by 5%. If the Government continues to run a budget deficit of 1, then:

Year 2 GDP = 105 Govt Debt = 51 so Debt to GDP ratio has fallen to 51/105 = 48.6%.

If this trend continues, then

Year 3 GDP = 110.25 Govt Debt = 52 so Debt to GDP ratio has fallen to 52/110.25 = 47.2%.

If this continues, then by

Year 10 GDP = 155.13 Govt Debt = 59 so Debt to GDP ratio has fallen to 59/155.13 = 38%

If these deficits are going to finance much needed public investment in infrastructure that expands our productive capacity thereby enabling the economy to keep growing at a healthy rate, 3% in the example above, what is there not to like?

I fear that the current obsession of seeing the running of the public finances as an extension of managing household budgets will, rather than protect our children from being saddled with our debts, burden them with a colossal bill for rectifying the problems caused by years of lack of investment.