Why the Coalition shouldn’t oversell the CSR
Thankfully, I wasn’t in Number Ten when the decision to invade Iraq was made. Whatever anyone thinks of the war (and we will have the report of the Chilcot Inquiry in the New Year), there is not much doubt that the process of decision making and communication leading up to the decision were deeply flawed. In particular, informed opinion and advice against the invasion was too easily dismissed, the case for the war overstated and the responsibility to develop a contingency plan for things going wrong shirked. As I have argued in the past, while these failings may be merely regrettable in the context of conventional domestic policy decisions, they are much, much more serious when facing the momentous decision to go to war.
What made me think about this again was the controversy over next week’s comprehensive spending review. I am not for a moment arguing that the detailed and nuanced decisions made in the CSR are comparable to the yes or no of going to war. Nor, even in the worst case scenario, does anyone think another economic downturn in the UK would generate the level of human suffering that has occurred since the Iraq invasion.
However, the decision to take a hard line on deficit reduction is a very big call. As far as I can tell, it is opposed by a majority of economists and if it is wrong it could significantly worsen the state of the economy and damage the livelihood of millions of people in the UK. More than that, if the economy does slump, it will be counter-productive: the lost revenues as a result of slowdown would probably be greater than the difference between the Coalition’s fast reduction approach and the last Government’s more gradual (although still very painful) plan. We could end up with deeper cuts and a bigger deficit.
Whatever my past tribal loyalties, I hope the decision turns out to be right. David Cameron, George Osborne and Nick Clegg all speak powerfully about the need to lower the deficit. As the Prime Minister said last week in his conference speech, Labour’s deficit reduction plan would mean the UK continuing to have a rising stock of debt (and rising interest payments) far into the future. That we are this year spending more on debt repayment than on the NHS is hard to stomach. But the fact remains that many serious, politically-neutral experts (for example Anatole Kaletsky in the Times this morning) say the scale of spending reduction planned could be a huge mistake.
The understandable temptation for the Coalition facing so much opposition to its plan is both to make its case as forcefully and unconditionally as possible and to create a culture in and around Government that dares not either question the plan or explore contingencies if it doesn’t work. But this would be bad Government and bad politics. Instead, Coalition leaders should be allowing dissenting voices to be heard, showing that they know the risks they are taking and have a credible and responsible plan for changing course if things go wrong (another massive failure of the Iraq process). Chris Huhne has adopted something of this tone but he seems to be alone.
In the last few days we have seen a great deal of evidence (on house prices, on retail sales and on manufacturing output) of economic slowdown. This may not be sufficient to change the policy but must surely alter the balance of the debate. If the CSR does go wrong and there is an inquest, we will want to know that the Chancellor and his team were looking at the evidence right up to the last minute not closing their minds to uncomfortable facts.
As I say, the Prime Minister and his colleagues make a powerful economic and political case for radical deficit reduction. But even last week George Osborne was guilty of some creativity with his facts (for example, overstating the proportion of UK debt which is held abroad). These rhetorical flourishes will not look good if the policy fails and people suffer.
So, in the interest of informed and balanced public discourse (something the RSA always seeks to promote) and in the political interests of ministers making brave but risky decisions I hope the next few days will see a change of tone from ministers. Instead of trying to convince us that radical deficit reduction is right come what may we need to hear the Coalition acknowledging that the argument is finely balanced, the risks real and that there must be a plan B if a double dip looms.
Public spending – any light amidst the heat?
The RSA has a double interest in the debate about public spending. In its lectures and Journal and other platforms for ideas, the Society aims to frame issues in ways which shed light, rather than heat, and also encourage us to understand the role we, as citizens, play in creating and solving policy problems. Also, our research programme is exploring various aspects of public service reform, with a particular emphasis on how public services can build social capacity. The question is whether the current row over public spending will be one that enhances public understanding.
Today sees the start of Labour’s autumn offensive. A speech later by Peter Mandelson and by Gordon Brown tomorrow to the TUC will be opportunities for the Government to lay out its core script. Also, today sees a political cabinet, at which the agenda is focussed on Party matters and the civil servants leave the room. I attended a few of these, and even spoke at one. Generally, they are deeply tedious affairs. Unlike the policy issues on the agenda of an ordinary meeting, at political cabinet everyone thinks they have something useful to say about political strategy and the state of the party. This means every single person speaks, many of them sticking to well worn scripts. There are those ministers who always start their contribution with something folksy about their own constituency, those who cannot speak without reminding colleagues of their voluminous knowledge of Labour history, those who offer deep analysis and new conceptual frameworks without actually saying anything useful (this would have been my flaw had I been a cabinet member). They are the kind of meetings where people late in the order of speaking say ‘most of my points have been made already’ and then go on to make them all again.
I assume that Brown’s message to his colleagues will be that Labour can use the row over public spending to do to the Conservatives in the autumn of 2009 what the Tories did to Labour on tax in the autumn of 1991. The phrase may not be used but the tone will be ‘Tory public spending bombshell’. With this tactic having been used before, in 2001 and 2005, with the public hostile to Labour and more open to the Tories, and with opinion polls suggesting the public wants to see spending reductions, this is a much harder attack to mount. At political cabinet the thing really to listen out for is the coded subtext beneath all the waffle. Today I suspect it will be this ’We are all behind you Gordon in trying to put the heat on the Conservatives. But if it doesn’t succeed the writing will be on the wall’.
Having said which, there will be some nervousness in Conservative ranks. Whether by accident or design the Opposition are in the position that whatever Labour says on spending constraint it has to seem tougher. Labour’s task is to recast the divide from being ‘Labour denial versus Tory realism’, which was how Osborne and Cameron successfully branded the divide in the summer, to ‘Labour toughness versus Tory recklessness’. But in arguing that this is not the time for making major cuts in public services, Labour has the backing not just of the TUC but many respected economic commentators, including last week Anatole Kalestsky in the Times and Martin Wolf in the FT.
If Labour does manage to start winning this argument the Conservatives may face some hard questions (not a bad thing if they are to be the next Government). If they back away from their tough line they will look weak, but if they stick to it, the pressure will be on to specify their cuts, especially as many Conservative front benchers seem actually to be promising more investment in their own areas.
Although there is bound to be lots of political posturing, this is at least a debate that matters and where Government policy can make a real difference. The hope (but not the expectation) must be that our politicians are forced to go beyond the point scoring to engage with the bigger question of what kind of welfare state we will need in the future, and what does this mean for us as citizens.
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