Labour should propose a growth plan not spread austerity more widely

UK GDP and main components

By Nicky Dempsey

The growing recognition that the 2015 election is Labour’s to lose has led to increasing rightwing pressures on the Labour leadership to maintain the essential thrust of ‘austerity’ policy.

The overwhelmingly Tory press focuses on the demand that Ed Miliband in particular commits to maintaining Tory spending plans.

With the growing sense that the Tories’ policy is just not working, inside Labour, where the Blairite faction has been decapitated, the right is obliged to advance a more subtle argument. The Fabian Society puts this succinctly. Even while acknowledging that simply signing up to Osborne’s plans would be a ‘disaster’, its general secretary Andrew Harrop argues, ‘nor can the party promise to reverse most of the cuts and spend lots more money. Labour must have a clear plan for closing the deficit which can withstand the political pressure that any deviation from the Conservative course will bring’.

This argument is completely wrong. The British economy is stagnating. The latest GDP data show the economy has expanded a miserable 1.1 per cent since the Coalition introduced its spending plans in 2010 and the world economy is slowing.

Above all, Labour needs a plan for growth. Only growth can raise living standards, provide decent jobs and pay for reasonable social protection.

The public sector deficit is a symptom of economic crisis, which only growth can close. This is increasingly understood as the series of sharp cuts to public spending has actually seen the deficit start to rise. Even the BBC says only a series of fiddles and accounting tricks has allowed Osborne to claim it is unchanged.

The Fabians speculate whether annual growth will be 1 per cent or 2 per cent or 3 per cent over the next period, with no suggestion that decisive action by the government might be able to affect the outcome. In fact, growth has been less than half the lowest of their projections since austerity measures were introduced.

As a consequence, the determination to avoid government action on the economy leads instead to a willingness to spread misery. The Financial Times accurately characterised the Fabians’ latest paper ‘Ageing in the middle’ as a programme to spread the effects of austerity more evenly, to pensioners. The proposals, to tax incomes benefits, means-test others and increase charges (including against the value of pensioners’ homes) have attracted a string of hostile comments on the Fabians own website.

In fact, to use Andrew Harrop’s word, such a policy would be ‘disaster’ in terms of equity, as well as electorally and economically.

Yet it holds an important truth for all programmes which are unwilling to interfere with the current stagnation of the capitalist economy. Without decisive government action to end stagnation, the only solution will be more of the same. The capitalist solution to the crisis is to drive down wages and workers’ share of the social product until the profit rate has been restored. At that point, they will increase investment.

The alternative for the left is a policy to direct the idle resources of capital, which are being hoarded. The reluctance to do so is not based on economics, but on ownership. Increased state investment removes the ownership of some of the means of production from capitalist hands – and the profits that accrue from this. It therefore encounters huge resistance from capital and its agents. But it is the only feasible means of resolving the crisis in a fashion where the working class and its allies do not pay for it.


The struggle to oppose austerity and some of the alternatives to it will be discussed at the People’s Assembly Against Austerity. Register here.