Tribune – Comment, news and reviews from Britain's democratic left

Not everyone was blinded by the brilliance of Lord Triesman even before his dramatic departure from the Football Association after the Mail on Sunday published what he had thought were private comments made to a close friend.  She evidently took a different view of his musings on alleged skulduggery on the part of rivals for England’s bid to host the 2018 World Cup, since she made a tape of them and sold it to the rabid rag. Lord Triesman sceptics remember him as a mediocre general secretary of the Labour Party. They may have forgotten that he was also an unmemorable Government minister, although it should be acknowledged that to stand out as a dunderhead at the FA, of all organisations, takes some doing. According to some estimates, a successful World Cup bid would be worth £3.5 billion to the country. If it turns out that football isn’t “coming home”, perhaps an invoice should be sent to Associated Newspapers, publisher of the MoS. Its readers are already to be deprived of Gary Lineker’s contributions. The star striker turned TV presenter said he could not continue as a columnist for a paper which had “clearly damaged” England’s bid.

PS: Lord Triesman has scored in one place at least: Tribune’s poll to find our readers’ favourite potential new leader of the Labour party. The Labour peer has scored an impressive 6% of the vote as a write-in candidate.

The latest former New Labour minister to pass through the revolving door from government into banking is Ruth Kelly. The former Treasury minister, Education Secretary, Transport Secretary and Communities Secretary should have plenty to bring to the board table at HSBC, Britain’s biggest bank. Ms Kelly, MP for Bolton West for 13 convenient years, will review City reform and consumer protection after becoming a managing director in the bank’s corporate development team – salary and bonuses undisclosed. In a statement, she said she declared that she would not be bringing any political agenda to her new role.  Shame she couldn’t have done Labour the same favour.

The election campaign was dominated by the soap opera of the personality interplays of the Leaders’ TV debates.

But beneath these media obsessions, there were real issues at stake.  The most important issue of the economic recovery was completely overlooked. At the core of this debate was who shall pay for the Bankers’ greed and how the country will recover.  I will argue later and elsewhere that Labour’s election strategy was significantly inhibited by a lack of boldness, but for the moment it is instructive to explore the terms of the debate between the Party Leaderships.

Two contending visions of how to respond to the crisis should have been on offer.  Unfortunately, these visions were only poorly expressed during the campaign.

On one side were the Tory Right who wanted to cut the deficit immediately. On the other, were the Labour and Liberal campaigns who argued that it would be foolish to cut whilst in the middle of a crisis and with the recovery only fragile at best.

A secondary theme was of taxation.  The Labour Government had introduced a policy of raising National Insurance which has the virtue of being ever so mildly progressive.  National Insurance falls most heavily on higher income earners and on the employers. This rise would not come into play until next year when the recovery is more secure. On the other hand, the Tories said that National Insurance is a tax on jobs.  What they did not say is that they would abolish the NI rise by increasing VAT.  This is a regressive tax which falls as heavily on poor as it does on the rich.

The truth is that Labour Governments have never increased VAT but our campaign was inhibited completely by Treasury orthodoxy, and so we would not rule out a VAT increase, we failed to capitalise on the secret Tory tax plan.

It is not difficult to see a loss of self-confidence in New Labour’s campaign which dates from the time when a host of business leaders attacked the NI proposal, an attack coordinated by the Conservatives.

But what is curious is that the Tory policy is not in the short term interest of the business community.  If the government begins to cut expenditure or increase taxation, or both, then there will be a fall in demand in the economy.  If demand declines, then there is a diminishing capacity to sell your products and therefore a decline in profitability. This in turn leads to workers being laid off and further falls in demand.  And so we enter a further recessionary downward spiral.

Within days of the Tory/Liberal coalition, the business community began to show signs of anxiety as the realisation began to emerge that the new government might actually endanger profitability.

The Financial Times noted that “ London equities were back under heavy pressure on Friday, as traders worried about the potential impact of austerity measures on economic growth.”

In fact the pace of the selling grew as the Friday session developed and as traders began to digest the new government’s intentions. The FTSE 100 lost 129 points to 5,307.08, a loss of 2.3 per cent in a single day.

The decline was broad-based, with all but two of the benchmark index’s constituents falling, more than wiping out the 0.9 per cent advance of the previous session, when strong earnings news provided some momentum.

The FT quoted a market analyst as saying that the FTSE was being marked down as “Investors are having to recognise that as economies start to get to grips with the important fiscal cuts needed to reign in deficits, consumers will have less cash to spend and this could impact on company earnings and economic growth. We have seen investors continue to move money out of the banks and miners and into the safe havens of the dollar and gold.”

The markets have suffered even further today, following the new Chancellor’s announcement that the Labour government had been ‘fiddling forecasts’ and sterling dropped to its lowest since March 2009.  Playing party politics with investors’ confidence in the UK reminds me of the old story about the Pharaoh on his deathbed; he leaves his son three tablets of stone containing advice on how to run the empire and tells him to only read them in order when the previous one has failed.  The son runs the empire successfully for a number of years until the public start to turn against him, he goes to the first tablet which advises ‘blame your predecessor’, which he duly does and calms the situation for a while, when the pubic start to revolt again he turns to the second tablet, which advises ‘re-structure your empire’.  The son puts in new systems and changes the entire way his empire is governed, which works, for a time and eventually he has to turn to the third tablet, which says ‘write out three tablets of stone for your successor.’  The Conservatives are currently on tablet number one.

Equally interesting were some comments from the boss of Sainsbury’s, Mr Justin King. Before we turn to Mr King’s comments we should recall the fact that his is hardly in the personal category of someone who need worry overmuch about a bit of fiscal squeezing.  Last year he was reported as receiving an income of about £5 million. Readers may also recall that this gentleman was one of the business leaders who launched the Exocet critique of Labour’s National Insurance rise in the middle of the election campaign.

Last week Mr King naturally welcomed the new government, saying he was pleased it had “addressed the budget deficit with more candour in the first four hours than in the four weeks before the election”.  This was because they Cameron’s team had announced that the full NI rise would not proceed. However, the realisation had perhaps only just occurred to him that the Tory alternative to National Insurance might be a rise in VAT.  Suddenly his euphoria turned to caution. He warned the Tory Lib coalition that removing VAT exemptions on food would hit the poorest shoppers the most.  As the Chief Executive of a major food retailer, it might hit his pocket too!

Today the new Chancellor has announced new measures which will send further shivers down the spines of business.  It is said that he has discovered further black holes in the budget and it is being suggested that he will add the PFI finances of the last decade on to the public sector balance sheet.  In the meantime there will be cuts on public programmes within 7 days.

All this is economics straight out of the Chicago school.  There can be no question that the coalition government will place us into a further downward spiral.  Businesses which depend on expanding demand within the economy can expect difficult times ahead. As always, though, when Businessmen shiver it is the poor, the old, the ill and the unemployed who catch pneumonia.

The decision by Labour’s national executive committee to close the gate early on nominations for the party leadership shows that old New Labour habits die hard. The effect is to ensure a battle of the established hierarchy, squeezing out a wider field of possible candidates and severely limiting the scope of the vital debate on Labour’s future that is needed.

NEC member Peter Kenyon describes it as a “coup”. His attempt to open up a simultaneous contest for the deputy leadership, to which Harriet Harman is clinging limpet-like, was disdainfully quashed. Only if 52 members of the new parliamentary group of MPs sign up in support for a challenger will there be an election, and that is not looking likely.

Attention is focusing on Jon Cruddas, who,in ruling himself out of the leadership race, stressed that there was an important job to be done within the party – seen as an application for a job that either does not exist or is not vacant. He said he is “determined to play a full role in the re-invigoration of a party that stands as the best hope for the people of this country.” This ignited calls amongst the progressive political blogosphere for a deputy leadership election.

Regular Tribune contributor Anthony Painter has emphasised the need for such a contest, stating:

“Party renewal is an ongoing sore within the Labour Party. The party needs to be more diverse, democratic, open and engaged. Jon Cruddas’ statement last night seemed to be a hint in that direction, and clearly the leadership race needs the strongest and most diverse feel possible. My sense is that there should be a deputy leadership race and Harriet Harman should stand as a very strong candidate in that, and the leadership election as well.”

Sunder Katwala, General Secretary of the Fabian Society, agrees that Harman should run for both positions, stating that the party would “suffer from an all male leadership contest.”

He states:

“Whatever she does decide about the leadership, I think she should take the step of opening up the deputy leadership by formally resigning the post and announcing she will seek nomination again, to mark the fact that a change in leadership and the party leaving office after 13 years marks a different political era. She would clearly be the strong favourite for the deputy leadership.

“Personally, I also think we ought to introduce two deputy leadership roles: that would be the only way in the long-term to guarantee that, whoever was Leader, we could always have some gender balance in our top team, which I think is an important expression of Labour values of gender equality.”

But would Cruddas, who virtually anointed Harman in the last leadership contest want to challenge. And what would it do for peace and harmony between the Harman household and that of Cruddas and wife Anna, who works with Hattie?

To read further commentary by Painter and Katwala on the merits of a deputy leadership contest, use the links below:

http://www.nextleft.org/2010/05/cruddas-does-want-to-run-for-deputy.html

http://www.anthonypainter.co.uk/2010/05/12/labour-should-have-a-deputy-leadership-election-too/