From the TUC

The politics of austerity

27 Apr 2009, by in Economics, Politics, Public services

David Cameron’s proclamation that we are now in the age of austerity will please much of his grassroots. The small state right may be in a minority in the electorate, but they remain strong in the media and among those Conservative core voters who hanker for a return to Mrs Thatcher (though actually she spent and taxed rather a lot – much of it to do with the costs of unemployment at a time when benefits were more generous.)

The intended trap for the Conservatives in the budget was the new 50p tax rate for those earning over £150,000, but such an obvious snare is easy to avoid (though there is perhaps some fun to be had – as William Keegan does – in asking why won’t they repeal a tax that they don’t think will raise serious money). But there is a much more subtle – and unintended – difficulty as well.

The Conservative problem is this. Voters stopped supporting them for a range of reasons, but among the most important was their seeming hostility to public services. David Cameron’s political achievement has been to detoxify the Conservative image as the nasty party in the minds of many swing voters. Some of this has been achieved by a genuine move to a much more liberal position on many social issue, but a large part has come from emphasising Cameron’s commitment to public services such as health and education. If they are now again the party of shrinking the state then this undoes a central part of his strategy.

Large sections of the Conservative Party will be very happy with this return to old certainties, though there is an accompanying danger that the Conservatives now look too pleased with current developments at a time when the rest of us are scared stiff. But there are two strategic problems.

First their roots are showing. Of course in time the public finances need to be put in better order. But it is by no means clear what is gained by a faster route to narrowing the deficit. This has come straight from the Conservative gut. If we were that concerned to make sacrifices today for the sake of our children, then mitigating climate change would be higher up the agenda. This is authentic Conservative instinct politics.

Second – as Martin Kettle and others have noted – it is going to make people ask hard questions about what the Conservatives will cut. As Adam has already said, there is a distinct lack of detail so far. Cutting the pay of the board of British Waterways will not fill the gap lost by the destruction of GDP caused by the financial crisis. Nor will pretending that we can have the same level of public services for a lot less money if they are delivered differently stand up to much scrutiny.

Much commentary since the budget has wondered whether we have seen the end of New Labour. The truth is that the financial crisis must have huge political implications for every political party. If we are to have an age of austerity, then the immediate question that arises is austere for whom? Voters expect those with the broadest backs to contribute to that austerity. Fairness becomes more important, not less.

A YouGov (pdf) poll for the Sunday People has some interesting findings that support this:

If the public sector finances get even worse than the Government predicts and it
had to choose between increasing the basic rate of income tax and cutting the
money spent on schools and hospitals which should the government do?

Increase the basic rate of income tax 59
Cut spending on schools and hospitals 23
Don’t know 18

Which one of these do you blame most for Britain’s current economic problems?

Britain’s bankers 42%
Britain’s government 33%
Bankers in other countries 15%
Governments in other countries 3%

There is an opportunity here for Labour, and the Budget had some steps in the right direction. But it also implies that deep public spending cuts will be the main route to restoring public finances. That can still change, and there is real ambiguity in some of the positioning around the budget.  Of course no-one can rationally insist that no spending can ever be questioned or priority challenged, but a stronger political position is likely to come from less ambiguity and more defence of public services.

4 Responses to The politics of austerity

  1. A Smith
    Apr 27th 2009, 9:33 pm

    The current crisis requires and creates an opportunity for a paradigm shift. Inequality has been shown to correlate strongly with a very wide range of social issues from prison populations to teenage pregnancy, from obesity to poor health. Diversity has been shown to improve decision making, and is particularly relevant given the type of “group think” demonstrated by the financial services sector.
    Nationalisation of the banks and substantial support to other sectors of the industry creates the opportunity for the government to require an increase in employee participation and employee ownership combined with a move over a named period for equality in representation of women and a reflection of the population in industry and parliament.

  2. Charlie Marks
    Apr 28th 2009, 12:28 am

    I agree – we need to limit strategic sectors of the economy to public or cooperative forms of ownership, with democratic structures of governance that allow the “tacit knowledge” of workers to be unlocked. The labour and cooperative movements must work together to publicly argue for this policy shift.

  3. Louise Stanley
    Apr 28th 2009, 4:44 pm

    I was a Tory voter in 2005 because Michael Howard actually had some communitarian roots and could be trusted to have some experience in government in deciding what needed to be kept and what cut. His problem was convincing the electorate, and that the government had not yet reached the downswing on the electoral cycle which accounts for a lot of current Tory popularity. I think Cameron has the reverse problem – he knows what to say, but not necessarily what to do. The way it is working is temporarily in his favour, but so long as the Tories treat politics as a zero-sum game rather than a long-term strategic exercise in good “joined-up governance”, there will still be difficulties at a general election.

  4. Directors savage higher rate tax: what would they have said to a minimum tax? | ToUChstone blog: A public policy blog from the TUC
    Apr 29th 2009, 12:48 pm

    […] we know, the fairly mild increases in tax for the very rich were among the most popular bits of the budget […]