New Labour’s new test

Post-Budget, there’s an awful lot of nonsense knocking around about the ‘demise of new Labour’. Let me take this head on. New Labour has just passed it’s greatest test. It’s shown its a philosophy not just for good times, but for tough times too.

Let me explain. Alistair’s budget this week was in essence a one nation budget. For the many and not the few.

John Reid put this well last Wednesday on Sky. If you’re in the middle of the worst downturn since the World War 2, you have to decide whether to act or not, to protect jobs and homeowners. We say, you need to act. Now, given that will cost money, we have to be upfront about how we return to balance – even if its a difficult picture. Alistair did this clearly. Third, to restore balance you have to make efficiencies, so be aggressive, but protect frontline services. Again, that’s what Alistair did. We’ll make £5 billion in efficiencies next year, but frontline health and education budgets go up substantially.

And, finally, if you need to bring in more money, do so fairly. So, the top 1% of earners – those who have done really well over the last decade – are asked to make more of a contribution. Those on under £40K are protected (remember even though NI goes up a bit, its offset by the boost to personal allowances). And people on under £100K are protected from income tax rises too.

This is simply a fair deal – the essence of new Labour. A safe – but fair – pathway back to balance.

The second half of the argument is to look at where we’re investing. We’re clear. We’re investing in protecting opportunity; the corner-stone of new Labour.

So, over £1billion goes to helping make sure that 18-24 year olds don’t spend longer than 12 months out of work or training. We refuse to see a generation written off as we saw in the 1980s. And well over £1 billion extra goes to make sure Job Centres continue to offer a personalised service to all even if unemployment goes up. That new service has helped put 1 million back into jobs this year.

Second, there’s £1 billion in tax breaks to encourage businesses to invest in capital equipment today – in readiness for the upturn – so this is a business-friendly budget. Third, savers are better off because we’ve raised the thresholds for ISAs. Fourth, we lay out clear strategic investments in low carbon technology and other strategic industries because we know they are critical to new industries and new jobs.

There are other criticisms that need taking head on. Some question the growth forecasts. But they are perfectly in line with the return to growth in Britain we saw after the last two recessions – and as Paul Krugman notes today, there’s been a huge monetary stimulus delivered in Britain which few others have matched.

Finally, some question the prospects for long term spending growth. We’re clear that spending continues to rise – but only at 0.7% a year. The idea that somehow this absolutely means huge cuts to frontline services is I’m afraid pretty speculative. It depends completely on the assumptions you make about growth in the economy (which depends in part on how well the G20 delivers on its stimulus), the rate of falls in unemployment (and therefore benefit costs) and what happens to interest rates. So, quite a lot of moving parts in the argument!

The real test now is what’s going to happen to Cameron’s Conservatism. I think events have totally exposed as empty of either long-term or short-term answers, and a party without a moral compass.

Incredibly,  Mr Cameron still says he wants to hand £200,000 in tax cuts to the 3,000 wealthiest families. And he wants to cut £5 billion from public spending NOW. Yes, in the middle of a recession. Economically crazy. Of the G20 countries, only Turkey is not mounting a fiscal stimulus right now. But, worse, Mr Cameron is playing hide and seek with the British people about just where this money is going to come from.

I think it’s time to come clean. Drop the marketing speak about ‘post-bureaucratic ages’ and ‘age of austerity’ and give us some straight talking. And the media need to stop him ducking the question so artfully. £5 billion in cuts today means the following;

– Taking 3,500 police officers off the beat, now

– Cutting the skills budget (at DIUS) so deeply that NO young person over the age of 19 could start an apprenticehsip this year, now

– Slicing £840 million from the transport budget, jeoparding Crossrail, now

– Cutting £100 million from our chairities’ budget, ending support for 400,000 volunteering opportunities and 4,000 charities (including the debt advice service in Francis Maude’s constituency), now

Even worse are the Tory plans for the year after. On Newsnight last week (22nd April), Tory Shadow Chief Secretary said he wanted to reduce investment by ‘an extra £6 billion each year to contribute towards reducing the deficit’ (Newsnight, 22 April 2009). This is on top of the £5 billion in efficiencies we’ve announced – so that’s £11 billion reduction in public spending the Tories want next year.

That is simply incredible. And where do they suggest the money comes from? Mr Cameron explained on Thursday morning, on the Today programme;

– Contactpoint (our child protection system)? But the running costs are only £41 million/ year

– ID Cards? Well, ID cards aren’t free. People pay for them. So money comes in to cover the costs. And 70% of the costs are needed to introduce biometric passports which the Tories say they’re committed to

– NHS IT? Well, Mr Cameron now says after the next election ‘will be too late to make any big inroads into the costing’ (Mr Cameron, Today programme, 24 April 2009). So, no money there.

In other words, they have no idea how to reduce costs. What are they trying to hide?

What is saddest , is the Tories now have no plan for the downturn – and no plan for the upturn either. They have no plan for growth, or new industries or new jobs. Look at how President Obama’s plan for innovation-led growth mirrors our own here. But, worse Mr Cameron has no plan for giving hard-working, aspirational people a share of the prizes the future offers. Investment in public services – Sure Starts, good teachers, apprenticeships, workplace skills training –  is absolutely essential if ordinary people are to get the skills they need to get on in life. The Tories’ inchoate cuts plan puts all that in jeopardy.

The bottom line is they offer no safe pathway back to balance. And no plan for helping any of us turn aspiration into success in the years to come.