Labour Don’t Lack Economic Credibility, People Just Think They Do

In reference to the world in which we live, American comedian George Carlin repeatedly said “it’s all bullshit folks”. This affirmation is particularly true in the realm of politics but there is one area of British discourse where it is especially prescient: Labour’s economic incompetence. The Tory press has, since the 2007 Financial Crisis and the Great Recession, undermined Labour’s economic record by accusing them of racking up debt thus illustrating the need for harsh austerity measures from a ‘grown-up’ Conservative government. I’m here to say that this claim is total bullshit.

The Financial Crisis of 2007 began in earnest in late September/early October as a result of a number of different factors such as subprime lending, the bursting of a housing bubble, deregulation and many others things. Firstly, one thing that didn’t cause the Financial Crisis was the UK Labour Party spending too much money on schools and hospitals, which is important to point out because many people think that Gordon Brown and Alistair Darling destroyed the world economy.
The second point is about the political results of this. Before the crash George Osborne went on television to talk about how subprime mortgages were a good investment and also encouraged someone on the BBC’s Daily Politics to avoid inheritance tax, yet Labour are seen as financially irresponsible. Some people could say ‘well yes but hindsight is a wonderful thing, nobody knew that the crisis was coming’; whilst this is true I would then like to ask that people look at some of the Chancellor’s current policies (right to buy, no new real bank regulations) to ask why he hasn’t acted more strongly to prevent a repeat of the crisis.
Here's a picture of George Osborne on national television advising people on how to avoid inheritance tax.
Here’s a picture of George Osborne on national television advising people on how to avoid inheritance tax. (Daily Mail)
The reason is that this child of Thatcher genuinely believes that the State should get out of the way of business and individuals and allow the market to govern itself invisible hand-style. In fact, despite now criticising Labour for not doing enough to combat the impacts of the recession, the Tories were arguing for fewer banking regulations. Don’t believe me, well thankfully I have something that the Tories hate, I have facts. In August 2007 the Economic Competitiveness Policy Group, which was a Thatcherite group within the Conservative Party, submitted a report to the then Shadow Cabinet entitled ‘Freeing Britain to Compete: Equipping the UK for Globalisation’, and in it suggested much less regulation of many sectors of the economy including a quip that says, in reference to the then Labour Government’s view on regulation “they seem to believe that without it banks could steal our money”– give it a month.
But bank regulation is not the main stick the Tories beat Labour with in regards to economic competence. The Tories constantly complain that Labour overspent when in power and racked up the deficit and the debt which is why spending cuts are necessary. The reason I bring this up is that the Tories’s argument doesn’t have standing because the question the public should have asked, but didn’t, was what if the Tories were in government at the time? What would they have done? Again, we have facts: in September 2007 (which was around the time of the run on Northern Rock) George Osborne was promising to match Labour’s spending plans in order to “maintain financial stability”, but, as was pointed out at the time by then Chancellor Alistair Darling, “in recent weeks the Conservatives have been proposing tax cuts of £21 billion. Now they claim they can match Labour on public spending. They can’t and their sums don’t add up”. So to clarify, at the time of the Financial Crisis the Tories wanted to deregulate the economy, more even though that was a cause of the recession, match Labour’s spending plans until financial year 2010/11, and wanted to cut £21 billion of taxes, yet Labour are the party apparently lacking economic credibility.
It is not that Labour didn’t contribute to the Financial Crisis, they did because they didn’t regulate the banks enough, but to say that the alternative is more economically credible would be false. If the Tories had been in power in 2007 the impact on the British economy would have been even more catastrophic as they would have actively deregulated financial institutions more so, as well as increasing public spending by the same amount as Labour actually did.
Nevertheless, despite all of these facts, the media has managed to trick people into thinking that Labour cannot run the country’s finances and that the recent suggestions by Jeremy Corbyn and John McDonnell such as a ‘people’s quantitative easing’ and clamping down on tax avoidance are proof of this incompetence. The only problem with this assertion is that the new Labour Shadow Chancellor is actually restoring Labour’s credibility through popular policies and the use of experts. By advocating raising the minimum wage, increasing taxes on the wealthy, closing tax loopholes, Labour are now appealing to positions that very popular with the electorate that just so happen to be left-wing.
Furthermore by creating a six-member economics advisory committee filled to the brim with people very knowledgeable in economics, whenever Labour are attacked for not understanding economics, MPs and activists can, and should, respond with the following: “You say that we don’t understand economics but all our policies are put in front of a committee that is comprised of: a former member of the Bank of England monetary policy committee; the Direct of Research at PRIME Economics who predicted the 2007 financial crisis in 2006; two professors of economics, one from the University of Sussex and one from City of London University; nobel-prize winning economist Joseph Stiglitz; and French economics superstar Thomas Piketty. So Mr Osborne shouldn’t be sitting there with his history degree lecturing other people about economics”.
He has to regain Labour's economic credibility in the eyes of the public. Not off to the best start but give it time.
He has to regain Labour’s economic credibility in the eyes of the public. Not off to the best start but give it time. (The Independent)
The thing that Labour lacks in the economics department is a confident communicator that can act relatively decisively. The recent furore over Osborne’s Fiscal Charter is proof of this; the idea is stupid and should never have been supported Shadow Chancellor John McDonnell. By changing tactics a few days before the vote and saying that you’re now going to oppose it gives the media, which already hates the new Labour leadership, permission to lay into you. In future Labour’s Treasury team should agree any press statements and policy collectively and stick to it because doing anything else gives the appearance of incompetence.
The Tories do not deserve their reputation of being fiscally prudent and economically competent, it is a total, albeit very well engineered, fabrication through years of messaging, misinformation and media reinforcement. The recent recruitment of six people who are individually more qualified to talk about the economy than the entirety of the Cabinet is a good way to re-brand Labour in the eyes of the public of having economic competence but those leading figures dealing with economic affairs have got to become better at sending out messages to the wider public. A muddied picture favours the Tories as they can rely on the media to bare down on it much harder than if the reverse were true; Labour must mend their image in the eyes of the public and challenging the Tories’ apparent monopoly on economic credibility is the key to winning in 2020.
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2 thoughts on “Labour Don’t Lack Economic Credibility, People Just Think They Do

  1. Indeed. The problem is that anyone with a smidgen of understanding of economics knows that Labour have far more economic credibility than the Conservatives, however it is the uneducated that decide elections.
    You are wrong that no-one predicted the global financial crash, lots of people did, they were frustrated that the Labour government didn’t do more because of a party political desire to not put off potential voters.

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    • I agree. You are correct that some people did predict the financial crisis- that was a hyperbolic exaggeration but I would argue that it was to prevent alienating voters. As you said the masses decide elections so I don’t believe Labour actively refused to listen, I personally think that they didn’t quite understand the extent to which big institutions were interconnected and how systemic the problems were.

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