Billy Hayes says progressive measures to protect Britain from the worst effects of recession are needed urgently
IN ANTICIPATION of this year’s TUC Congress and Labour Party conference, activists need to analyse the most pressing problems we face.
Our opponents – both inside and outside the media – are hoping we continue to engage in feints and plots to replace the current party leadership. Such indulgences must end. All they can achieve is to shorten the life of the Labour Government. In reality, the fortune of the Government now hangs, not on the leadership issue, but on how it responds to the recession. Between now and 2010, there is no reason to suspect there will be comfort from the economy other than that achieved by Government action.
The desperate situation we are facing has to be addressed. After the collapse of the international dotcom boom, the British economy only avoided a slowdown because the deregulated finance sector allowed excessive borrowing. The loss in the share of the national income going to wages was covered up by the ability of workers to run up debts, both secured and unsecured. But now the impact of the recession is being amplified in Britain because of the debt mountain.
The Government overplayed its hand by trumpeting the end of “boom and bust”. Now that the bust has returned at the end of the credit-based boom, voters are likely to blame the Government.
The dreadful figures in a recent Harris opinion poll demonstrate this. More than three quarters of those questioned said that ministers are at least partly to blame for the recession, while 56 per cent said that Labour is greatly or completely responsible. Eighty-nine per cent of respondents thought the economy had deteriorated in the past year. Such shifts in public opinion cannot be spun round. Only very serious Government initiatives can reverse this trend.
Implementing measures to protect the vast majority of people is also the best way to attack the Tories. The Compass initiative to promote a windfall tax on energy companies prompted Shadow Business Secretary Alan Duncan to accuse Labour MPs of “old-fashioned socialist hatred”. In fact, a tax aimed at securing benefits for the poor and low paid is a serious threat to the Tories. Duncan and his friends know that Government measures that actually defend living standards during the recession will reduce to nothing Tory rhetoric of being concerned about poverty.
Equally, the Government must address the need to cut interest rates. The recession we face looks at least as serious as that of the early 1990s. Continuing to prioritise the fight against inflation threatens to take the British economy into a Japanese-style deflation.
Of course, we are now experiencing the negative aspect of the independence of the Bank of England. But the Government can make its priorities plain enough to have an impact on the Bank’s policy.
The Labour Government and the Labour Party’s electoral position will become irretrievable without such initiatives. Merely waiting on the markets to revive will be catastrophic.
In July, according to the British Bankers’ Association, mortgage approvals were down by 65 per cent on 2007. Meanwhile, the Local Government Association predicts that council house waiting lists will top five million in less than two years’ time. This represents a huge growth in demand.
How many million votes are there in these issues? And who seriously believes that the Tories can address problems of this magnitude? Yet the timidity of ministers is frightening. The speculation has ben whether stamp duty will be suspended or not. Adjusting stamp duty is about as effective as opening an umbrella in a gale. What is needed is serious Government spending to restart the housing market.
The Treasury must end its preoccupation with Tory taunts about golden rules. The Conservatives could be left to twist in the wind if Labour were to embark on an extensive house-building programme.
We should also be prepared to use public finances to prevent widespread foreclosures on the part of homeowners who lose their jobs or find they have debts they cannot repay.
At this year’s National Policy Forum, the unions secured some commitments on housing. The general Government approach at the NPF was not to allow any specific spending pledges. Hence there is very little in the NPF decisions which are relevant to the current recession. However, the unions did secure the following commitment: “Labour recognises the case for first-class council housing and the central role that local authorities will continue to play in ensuring there are sufficient high-quality homes for social rent in their area, including by building more council homes.”
The economic and political fortunes of the Government would be transformed if it put up the financial resources needed to implement this statement of good intentions.
The package the Prime Minister is preparing could have a hugely positive impact on British politics. It is at times of crisis that public perceptions of politicians can change most dramatically. Timely action to offset the slump and prevent a slip into a full-blown recession will never be forgotten.
But some policies cherished by this Government must be reversed. The recession will be deepened if the Government continues to press down on consumer spending by cutting real wages in the public sector.
A rational case can be made for new differential tax rates for those in the highest income brackets. Unless such a move is made, the NPF commitment “to ensure the tax and tax credit system remains progressive” will be a hollow one.
Some at the heart of government will insist that public finances prevent any major fiscal boost to the economy. As ever, these are matters of priority. Government spending in this country is distorted by the bloated and debilitating levels of military spending in comparison with other European Union members. The wars in Iraq and Afghanistan are morally indefensible. We have heard outlandish language from the Foreign Secretary in supporting the possibility of conflict with Russia as the cost of bringing Georgia and Ukraine into Nato. Has David Miliband forgotten that Russia has nuclear weapons? The Government should discard its nostalgia for empire and stop giving uncritical backing to the imperialist adventures of the United States.
A sharp turn away from the electoral abyss is still possible and essential. The Government can demonstrate that only Labour can shelter the population in a recession. Every activist in the labour movement should be demanding this from the Labour Government.
Billy Hayes is general secretary of the Communication Workers’ Union
