British Labour’s biggest problem going into the next election is that its own Leader looks as weird and out-of-touch as the incumbent Prime Minister. Perhaps his most awkward intervention before the bacon sandwich debacle was his appearance at an ‘anti-cuts’ Union rally when he tried to pretend he was with the crowd. His party confirmed at the weekend that he really isn’t – and rightly not.
Labour now accepts it was talking nonsense about the ‘Squeezed Middle’ and would in fact tax those on middle incomes more; and it also now accepts opposition to the Coalition’s spending plans (which see public spending rising in absolute terms but falling in real terms) is nonsense. This makes Labour a vaguely credible government – and it marginalises the ‘anti-cuts’ brigade who are, quite simply, wrong.
They are wrong because public spending isn’t actually falling in absolute terms; they are wrong because public spending reductions are not the same as ‘cuts’ (they may simply mean doing things more efficiently – to be supported, surely); and they are wrong because, as everyone now accepts, you cannot simply keep public spending ballooning when revenues are vastly lower than expected. Be very clear – anyone opposed to this is denying reality and not to be trusted.
It is worth repeating why revenues (at least over this parliament) have been so much lower than they were and, more relevantly, than they were projected to be. It is quite simply that the UK is a significantly poorer country than it was or, more accurately, than we thought it was in about 2007. Within three years of the run on Northern Rock, the UK Treasury’s revenues had fallen to 14% below where they were projected to be three years previously – the equivalent figure almost everywhere else in the West (aside from Southern Europe and Ireland, understandably) was around 5-6%.
In other words, the UK is 14% poorer than we reckoned. To sort that, we need to invest in skills, technology and innovation particularly where export-focused – as, in many cases, we are. But let’s be very clear, we cannot just spend money no one’s actually gone out and earned.