Labour’s purpose stands in sharp contrast with Tory plans for drastic cuts, says Peter Hain
After a decade of steady growth, what purpose does Labour serve in difficult economic times? Is it simply a choice between “nice” Labour cuts and “nasty” Tory ones? Not at all. But Labour’s mission needs spelling out far more effectively than we have managed so far.
The Government has responded to the biggest peacetime threat to the world economy since the 1930s by investing now in order to stave off an even worse recession.
But, although this investment has consequences for the future of Britain’s public finances, there is no justification for the savage cuts the Tories and Liberal Democrats demand. Labour’s plans should reflect the party’s values in a period of tight budgetary pressure: values of solidarity in adversity.
The most pressing task is to encourage recovery. That is why we have boosted public investment this year to a 30-year peak.
The Tory pledge is for an emergency budget to make immediate cuts in government spending. If implemented, that would remove vital support for people and businesses and choke off recovery just as the wheels of industry were getting moving again. As well as propelling unemployment sky-high and causing misery all around, it would send the whole economy back into a second severe recession.
Clearly, the Tories have learned nothing from what happened in the United States in 1936-38. Because of President Franklin D Roosevelt’s 1933 New Deal spending programme, the American economy began to recover and unemployment fell from 25 per cent to 14 per cent. However, under frenetic pressure from Congress, together with a media-supported clamour to balance the budget – echoes of Britain today – Roosevelt lost his nerve and changed course in 1936.
He cut the government, hoping to balance the budget within two years. The Federal Reserve tightened monetary policy. The result was that unemployment soared again to nearly 20 per cent.
It would be similarly disastrous to try the shock therapy of big cuts in borrowing and public spending now.
David Cameron’s blueprint for massive cuts reflects an enduring Tory hostility to government that is reminiscent of Ronald Reagan. It would see key public services closed down or outsourced, as some Tory councils such as Barnet have already begun to do. Far from Cameron’s “compassionate” or “progressive” conservatism, this is unequivocally right wing.
Labour has rebuilt our social infrastructure and saved the National Health Service, and is determined to protect the welfare state in future budgets. All this would be threatened by the Tories, taking Britain back to the days of patients dying on trolleys in hospital corridors.
Labour has already taken 500,000 children out of relative poverty and we remain committed to ending child poverty by 2020. The previous Conservative Government allowed child poverty to double and the policies of David Cameron and George Osborne would mean a Tory action replay of that record.
Having taken one million pensioners out of poverty, Labour aims to see all pensioners share in rising prosperity by restoring the link between average earnings and the basic state pension.
Where Labour will raise income tax to 50 per cent for those on £150,000 and above, the Tories’ priority is to raise the inheritance tax threshold, disproportionately assisting the very richest 3,000 people by £200,000 each.
Where Labour will establish firmer regulation of financial markets to curb the clear threat posed by casino capitalism to everyone’s livelihoods, the Tories want to scrap rather than strengthen the Financial Services Authority.
Where Labour introduced the national minimum wage and greater protection for people at work, Tory employment law reforms would make it easier to fire workers.
No one seriously suggests that the next 10 years can be a repeat of Labour’s pre-credit crunch decade of record investment. But our chosen course of prudence with a conscience would be dramatically different from Tory slash and burn. Britain faces a choice between progressive Labour and right-wing Conservatives; home truths from Labour, half-truths from the Tories; more rigour from Labour on public services or rigor mortis from the Tories.
Economic challenges did not stop Labour from introducing the welfare state in the 1940s, comprehensive education in the 1960s or an earnings related state pension in the 1970s. Tight budgets will not stop a fourth-term Labour government embarking on the next great wave of reform: a national care service and a new set of citizens’ rights to public services. It is high time the Labour Party and the Labour Government stood tall and proud about our unfinished mission for social justice – and started fighting back.
Peter Hain is Secretary of State for Wales and Labour MP for Neath
About The Author
Labour are supposed to be the party that intervenes in the free market to make it fairer.
Gordon Brown had a chance to intervene in the housing market in 2003 to stop it overheating but he didn’t. What did he do? He changed the inflation measure to exclude house price inflation.
So we had an unsustainable house price bubble and now the price of housing has to be artificially propped up to stop the economy collapsing. Meanwhile the low paid are permanently excluded from the market.
Labour is a disgrace. It doesn’t do what it says on the tin.
Labours not a disgrace it’s a total disgrace, we all know the good times actually started under Thatcher, then major and then Labour just allowed it to carry on with debt spiraling out of control, now look where we are. I’ve had enough of New labour labour and brown, and I’ve been in the party for 40odd years.