Cuts agenda is a losing battle

The run-up to last week's Budget was marked by widening criticism of the Tories' plans for savage public-sector cuts coupled with a steady deterioration in its poll lead. The two are clearly linked. When the agenda is pushed onto a debate dominated by cuts, Labour tends to fall backwards in the polls. And Labour advances the more it articulates opposition to cuts. This is not an abstract question. It is a live debate within Labour. For example, according to The Guardian's Martin Kettle, "inside the government it has been Mandelson who has led the fight against Gordon Brown's instinct to use the Budget as a way of pitting 'Labour investment' against 'Tory cuts'." Labour's task - both this side of the election and afterwards - is to protect that great majority who did not cause the global economic crisis and should not be penalised for it. Many voters are deeply concerned that the Tories plan to start cuts immediately, if they were to take power next month. This would extinguish the fragile economic recovery and drive down living standards. Economists such as Professor Joseph Stiglitz, a Nobel prize-winner, was one of more than 60 leading economists to warn of the dangers of Tory plans to cut public spending before the recovery is secure.

The record of George Osborne and David Cameron during the economic crisis has been dreadful and needs to be relentlessly exposed. They have opposed nearly every measure to deal with the deepest crisis in 80 years. As Cameron told Conservative Spring Forum last year, "I'm a fiscal conservative." That's why, when it came to that big decision to oppose the VAT cut and the so-called fiscal stimulus, I didn't consult a focus group or an opinion poll - I just knew it was the right thing to do." The unattractiveness of the Tory message is contained in the viciousness of the cuts proposed on the one hand and the symbolism of their inheritance tax cut plans on the other. Their decision to stick with plans for inheritance tax cuts that would leave 97 per cent of the population getting nothing while giving £200,000 to the wealthiest 3,000 estates demolishes their claim that "we're all in this together." Rather than getting the economy back on the path of growth, which requires tackling the huge collapse in investment driving the recession, Cameron is obsessing about the deficit. He responded to the Budget by saying that "the risk to recovery is not in dealing with the deficit now." But the deficit is a product of the plummeting tax revenues that resulted from the recession. If economic growth returns, the tax take will improve and the deficit will fall. That requires state action; state intervention to stimulate the economy helps to improve the public finances.

The problem in our society is not public-sector spending, public-sector workers or public-sector pensions. None of these caused the global crisis. The fragile nature of the recovery means that the role of the government needs to continue over the next year and beyond. Budget 2010 did see a small fiscal stimulus in contrast to Tory calls for immediate cuts. The green investment bank plan is a good idea that needs to be given proper state support. Further and larger fiscal stimulus would not only help to boost the economy and so reduce the deficit but it would also address some of the pressing social needs of the country. A big boost to green industries and in modern transport infrastructure and house-building where private investment has plummeted would form a popular political message and help to maximise opposition to the Tories at the election. Against such an agenda, there is a strong clamour from the right-wing press for Labour to pursue a course on cuts that would damage the party while benefiting the right. The memories of the damage that Thatcher caused to communities are still firmly etched in much of the population's memory. Reminding the population of the danger that the Tories pose in returning to those days of the 1980s and proposing a positive alternative will help to boost Labour's support at the election.