Parties are promising the wrong things on public spending and benefitsby Frank Field / May 22, 2013 / Leave a comment
Balancing the national budget presents a double challenge for Labour. The first challenge is economic; the second political. For 50 of the 64 years since 1948, governments of both parties have run budget deficits. The current deficit, although larger than at any other time, is no new phenomenon. Our political culture has settled into a dangerous rut whereby governments promise more in public services than they can finance from tax revenues. This presents a challenge to our political system but particularly to Labour.
The 1960s Labour revisionists won the argument that Labour’s objectives were bound up with achieving greater equality rather than implementing Clause IV, which promised public control of our means of production, distribution and exchange. Equality would be gained by high public expenditure being paid for by redistributory taxation. Greater public expenditure there has been, but the electorate has shown resistance on the tax front. Now, public expenditure totals are under attack from the coalition government and would be from a Labour government too.
The government, with little grace, is on course to implement the budget reduction timetable Alistair Darling put in place before the 2010 election. But New Labour’s strategy that high public expenditure could only be sustained if the middle classes are given their share has turned out to be a political boomerang. At the first rumblings of middle-class discontent, governments and opposition have quit the battlefield, showing themselves terrified of tackling middle-class welfare. Yet this is the same group that has long dug in its feet against any increase in taxation, let alone a programme of greater fiscal redistribution.
Much of the revisionists’ strategy was based on the rather naive assumption that the goal of greater equality would somehow be automatically achieved as the social wage budget continued its happy, inexorable upward trajectory. That strategy has failed and therefore part of the new politics must be to direct attention away from the simple input calculations to a much more careful consideration of outcomes for each tranche of taxpayers’ money. We already have more than enough evidence to show how effective the middle classes are in using their sharp elbows to get to the head of the queue of any public expenditure programme.
The second budgetary challenge, but one which affects Tory and Labour alike, was set out in an article in Prospect by Paul Johnson, director of the Institute for Fiscal Studies back in February…