Should Labour approach the coalition with its Balls or its Darling?

The reality facing all British political parties is that the next election, currently scheduled for 2015 will come down to the economy. Indeed, if there is an iron law of electoral politics it is the oft-quoted statement of Bill Clinton’s campaign manager, James Carville: “It’s the economy, stupid.” While economics is not the end all and be all of winning elections it is still by far and away the most important factor, and that goes double for countries in recession. The Coalition has made the centrepiece of its time in office an ambitious programme of cuts to public spending, such cuts are inevitably unpopular, at least in the short-term, yet, there is a potent economic argument for them. Now, I am not an economist, but my reading of the situation is that different economists have differing attitudes and that the cuts may or not work, but that, in general most back the cuts. That said, economists have been wrong before, and we’ll not know who was right for many years now. Yet I’m not an economist, I’m a political scientist, so today I want to talk about cuts from a strategic POV.

All this given, the Labour Party’s most important tactical decision of the next four and a half years will be their long-term strategy on the cuts. Labour has two basic strategies that have been proposed for the economy, which are:

The Darling Strategy

The Darling Strategy, proposed by former Chancellor of the Exchequer Alistair Darling, is the strategy that Labour ran on in 2010. It is for immediate deficit reduction but is much more cautious than the coalition’s strategy. While the coalition proposes eliminating the deficit by 2015, Darling proposed cutting the deficit in half. He would have been slightly more reliant upon tax rises than the coalition, but cuts still would have been high.

The Balls Strategy

Ed Ball’s argument is that any cuts to the public sector risk slowing economic growth, and that the best way to deal with the deficit is to grow the economy to recovery AND then deal with it.

I will leave the economics of these two stances to actual economists. What I want to discuss is the strategy of these stances.

Let’s say Labour adopts the Balls strategy. This means doing several things. Firstly it must explain why cutting the deficit is wrong. It will be constantly attacked by the Coalition as economically irresponsible. Terms like ‘deficit deniers’ will be thrown at them, but if they succeed in convincing people that this is a viable economic strategy then they will enjoy some great success as the cuts begin to bite. It is likely that the cuts will lead to an immediate slowing of the economy and a rise in unemployment, both things which will help Labour. Fuelled by anti-cuts anger Labour would likely gain activists and donations, vital for its cash strapped infrastructure and local councillors, but the important prize is the 2015 election. If the cuts succeed, or are perceived to have succeeded by 2015, it will be easy for the coalition parties to blast Labour as economically illiterate, the previous four and a half years won’t matter, and it is very difficult to see Labour winning in such circumstances. In fact if Labour were to pursue the Balls strategy and the economy recovers by 2015 I would bet on them losing seats If on the other hand the economy is still in the doldrums come 2015 the electorate will be crying out for a radical alternative and Labour will be well-placed for a big majority, and with the economy in such dire straits Labour may well be positioned in such a way that it can do something that has only happened twice since 1945: remodelling the entire economic system. Therefore this is a high risk strategy, which essentially requires Labour to bet against coalition economic policy succeeding.

Now let’s say Labour adopts Darling’s strategy, advocating cuts, albeit slower and less virulently. The coalition will demand to know the details of said cuts, and so will the public. Yet it is much easier to decide what to cut in government – where you have available much more economic information and the full body of civil servants. There is also the risk that in outlining an alternative cuts strategy Labour may make itself unpopular in other ways. They may find that the public takes against their programme, a certain tax rise or a certain cut may be surprisingly unpopular. The government, with the civil service at its disposal will also be better placed to judge whether Labour’s sums add up, putting it in a bind where it advocates cuts but cannot say exactly where. There is also the danger of being too close to the government having their voice deemed irrelevant as both government and opposition advocate cuts. ‘Why vote for cuts-lite?’ the electorate may ask. Yet if they can pull it off they’d have a much better chance if the cuts are deemed to create growth. It will still be an uphill struggle no doubt, but the possibility remains that Labour could still win on platform of ‘there was a fairer way to cut the deficit’. If on the other hand the cuts are seen to have failed Labour will be favourite by virtue of not being the government, and will be able to claim some authority from suggesting a more modest approach, yet they will not gain the benefits potential in a win under the Balls strategy.

Labour has to be very careful in its economic policy strategically. The party should remember that twice in its 20^th century history (1955 and 1983) Labour has been outmanoeuvred on economic policy by elected Conservative governments and lost yet more seats to the Conservatives during their first re-election after having being booted out of power following poor economic growth. There is a lot of risk here, and Labour will need to be deft either way. Personally I would take the, more cautious, Darling strategy, but there are no guarantees here. Labour’s economic policy is going to require an extremely safe pair of hands.