The central message from Labour’s conference in Brighton is that “ideology is back” in British politics.
Emphasising differences on the economy, the financial crisis and public spending, Labour has sought to depict an ideological gulf between themselves and their Tory opponents. Labour is the party of public service – the Tories of markets.
Whilst it is true that greater differences have opened up between Labour and Tories on these economic, financial and public spending issues, how really big are these differences?
On the economy Labour is right to point out that the Tories have taken a fairly extreme position on reaction to the crisis – opposing economic stimulus measures pursued widely by governments of Left and Right across the OECD countries. Similarly, their opposition to maintaining public spending on services is an outlier position. Most western governments have chosen to continue spending, despite collapsing tax revenues, to avoid even greater recessionary pressures. Public debt has increased – something the Tories say they would reverse.
Realistically it is as yet unclear how big these differences will prove going forward. The stimulus packages will be over and the public debt will have risen by the time the Tories come to government, if they do. The consensus is that public debt, and therefore in the short-term public spending, will have to be reined in. the indications are the Tories will want to do this faster than Labour would but they know this risks a hesitant economic recovery – will they really risk a double-dip recession by brutal cuts to public spending?
When Margaret Thatcher tried this in the early 1980s she was only saved from political oblivion by the Falklands War. Unless David Cameron wants to be a one term PM, he will surely need to be a bit more cautious than the current rhetoric suggests – he can’t rely on a repeat on Thatcher’s 1982 great escape.
Even if the Tories do cut public spending dramatically short-term, what is their long-term strategy? Average spending on public activities over the past 4 decades or so has been about 43% of GDP. Is their aim to drastically go below this? If so, they will have to do something really drastic to public services. Otherwise, what we are likely to see is a difference between the two main parties of maybe 2-3% of GDP (about 4-6% in public spending terms) in their more long-term plans – a significant difference but hardly an ideological gulf. Those sort of fluctuations, and bigger, have taken place WITHIN the periods of both Tory and Labour governments. US public spending averages around a third of GDP and Scandinavian countries nearly two thirds – that is an ideological gulf.
The really intriguing question is how would each of the main parties handle the Governments new-found role as part-owner and complete regulator and guarantor of the financial system? At the moment the debate focuses on the relatively trivial issue of bonuses – important, but not really crucial. The real issue is what is the State – going forward – going to do about this new-found role? All the major British banks are now “too big to fail” and around half are state owned – what is going to happen to this substantial part of the economy? We await clear answers from either main party – there is no ideological divide at the moment because neither of them seems to have clue what to do about governments new role controlling the “commanding heights of the economy”, to use the old-leftist phrase.
Most of the other differences between the main parties are more managerial than ideological – who would run things best? It is a bit early to say ideology is really back in British politics – we’re still mainly in the age of competing managerialisms.
