Spending Review – Labour’s response

By Paul Hunter, Research Fellow

It is well known that George Osborne is both Chancellor and the electoral strategist for the Conservatives, something which was particularly apparent in the 2015/16 spending review announcement. Despite all the rhetoric around cutting to invest Osborne stuck to the austerity script.  The fanfare around capital investment proved a chimera and there was no disguising the Conservative’s determination to roll-back the state and punish public sector workers.

Politically the spending review once again prioritised pensioners over the young and the South over the North. Populist measures on JSA claimants, immigrants and the ‘underserving poor’ will make little impact on the public debt but further re-enforce the dividing lines for the 2015 election. However, it is not clear whether the continued assault on welfare and public servants will be enough – even if it raises the spirits of the chancellor’s backbenches.

To recap, the headline measures included:

  • Continued reductions in public sector workers
  • Cuts to public sector pay with no automatic pay rises for time served
  • Those made unemployed would not receive benefits for a week
  • A cap on welfare spending (excluding pensions)
  • Immigrants will have to learn English to receive benefits

The message again was clear: the UK’s economic malaise was due to overspending (Downing Street under Labour) and not a banking crisis (Wall Street and the international financial community), and whilst there is a lot to do, the worst is over. The target for the new policies: Labour’s core vote.

This narrative may play well. As polls continue to show, cutting benefits for so called ‘scroungers’ is popular. Public servants are portrayed and seen as featherbedded. Immigrants are simultaneously blamed for both taking people’s jobs and for an increasing benefit bill. The nasty party are nastier than they were.

However, the return to type of divide and rule and blaming those with least is not necessarily a big enough vote winner beyond the Tories’ heartlands. Leaving aside the long term impact of cutting public sector jobs which might eventually change the voting intentions of those subsequently employed in the private sector, these measures impact large swathes of voters in places where the Tories need to win.

Attacks on welfare might go some way to doing this, but could make the Conservatives appear too divisive and self-serving. Labour can triangulate on welfare to some degree, but has to do better on the economy – polls still show more people blame Labour for the crisis and trust them less. A switch in attitudes on welfare (which could emerge sooner rather than later if Universal Credit fails in the way some expert predict) and a weak recovery could leave the Conservatives with a mountain to climb.

More importantly perhaps, and as I have blogged before, the policies guiding the spending review are all negative. Nothing in the spending review suggested how the Conservatives were to get the UK out of its wages crisis or tackle income inequality. Welfare bashing might afford those in favour a moment of schadenfreude but they do nothing to improve the living standards of the ‘squeezed middle’ in the key seats.

The dilemma for Labour is how to respond with a positive narrative that’s believable and sellable in 2015. Attack too simply and find yourself portrayed as the party of welfare dependency, bad government and public excess. Set out an alternative agenda around less spending cuts and you face accusations of economic incompetence and (for the leadership the most frightening of all) another ‘tax bombshell’. Ed Miliband knows he must win back the public’s trust, but it has – as he acknowledges – got to be on an agenda which goes beyond defending the NHS and  the welfare state. Labour must take on the mantle of work and fair pay, and start to carve out new policies to achieve responsible capitalism and sustainable growth in all regions.

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