new rules

Photo: Andy Rain/EPA

If it weren't already obvious, yesterday's statement by the Chancellor has clarified the central political challenge for all parties over the next five to ten years: explaining the best way to do more with less.

It's now clear that the structural deficit won't be history by the time of the next election; indeed it may well still be with us come the one after. It's also clear that we face several years of slow growth and low revenues. Meanwhile, the ageing process goes on, which is a matter of regret to the Treasury almost as much as it is to every one of us over 25. We are an economy with rising demand for public services and stagnant demand for private goods and services. Not a great combo.

The new landscape poses a big question to both main parties, and as yet, neither one is answering it.

The Tories are struggling to retain control of their narrative. Their story is something like this: we are clearing up a mess, and in order to do so we have to inflict temporary pain. But it will be worth it, because in a few years time we'll have cleared up the mess. Things will be back to normal, and you'll have us to thank.

But it's now becoming clear that the mess isn't going to be cleared up before the next election, and - even more crucially - that there will never be a return to 'normal'. We are going through a painful adjustment to a new and permanently different condition. That doesn't necessarily mean we're all doomed, although certainly, we'll be a less rich country than we were, or appeared to be. What it does mean is that we'll need to organise our public services differently; we'll have to do more with less. Making the case for that will require real imagination and political courage. The Tories, other than the too-vague and now derided 'Big Society', haven't given voters a vision of what comes next. As a result, they're associated with the pain when there's no relief in sight.

Labour are in an even worse position. As Daniel Finkelstein points out in another excellent column today, by criticising 'Plan A' they are unintentionally giving the government credit for having a plan at all. Meanwhile, their own plan, which involves borrowing more money in the middle of a debt crisis, is a non-starter for most voters. It might make economic sense but in current form it's very hard to explain, and the two Eds certainly aren't doing a good job of explaining it. As Finkelstein says, by criticising every cut the government makes, Labour is reinforcing, rather than undermining, the government's contention to be providing leadership in tough times.

In my unscientific view, politicians frequently over-estimate the importance of ideological positioning, and under-estimate the importance of being seen to be effective; that is, of being seen to have a plan and the ability to put it into action. Within an acceptable middle range of the ideological spectrum, perceived effectiveness matters much more than political direction. It's why the smart attack on Obama, as Romney alone amongst the Republican candidate knows, isn't that he's a socialist bent on destroying America, but that he is utterly ineffectual, a nice guy out of his depth. It's why Labour should be portraying this government as chaotic and hapless, rather than reckless and evil.

But the even bigger challenge for Miliband and Balls, as Hopi Sen has been saying for some time, is reinventing Labour's offer for an era of permanent austerity. How do you make the case for a social democratic party that can't spend any more money?

Comments

[Kaine]

"How do you make the case for a social democratic party that can't spend any more money?"

You point out the flawed premise. Total UK personal wealth in 1996 was around £3 Trillion. In 2006 it was over £6 Trillion. Today it is around £9 Trillion. If we pay off the totality of the UK's debt, the country would still be wealthier than it was in 2006.

The issue is not that UK plc makes no money, it is that the distribution of that money has led to two nations. A rich one, invincible and cosseted, and a poor one, left to the idiosyncracies of global capital flows.

[Marbury]

Oh well that's OK then! Gosh you've cheered me right up with your numbers. I will ignore those silly OBR folks.

[Hal]

I'd be interested in your reaction to Paul Krugman, here: http://krugman.blogs.nytimes.com/2011/11/30/bleeding-britain/

I'm much more familiar with what's going on in the US than in the UK, but there are strong similarities. It seems to me that Krugman's been right that the stimulus in the US was too small, that our basic problem is lack of demand, which government can revive by direct spending, and that the time to close the federal budget deficit is after the economy returns to a growth path, not before.

Are there any Keynsians left in Britain?

[Marbury]

Oh yes, there are plenty of Keynsians, and the opposition has been arguing for an expansionary fiscal policy to promote growth. But it's very hard to make the case for more borrowing during a debt crisis. The Krugman column is a little masterpiece of polemic, and puts the case better than the Labour Party has managed. But - well, I don't know, but I get the impression that if there was a time when borrowing and spending more would have got us out of this hole - and there may well have been - then that time has passed. Given the new landscape, any more borrowing will take us into Spain/Italy territory.