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TUC conference: critics of austerity can't deny growth is back. But our arguments are still valid TUC conference: critics of austerity can't deny growth is back. But our arguments are still valid
(12 days later)
Britain is booming, the economy's getting fat, so please put a vote in the government's hat – that's the simple message ministers are developing. And with growth returning, and forecasters dusting off forgotten skills of how to revise upwards, some say the coalition has a point. So should the critics of austerity – such as the TUC, which meets in our annual congress next week – give up?Britain is booming, the economy's getting fat, so please put a vote in the government's hat – that's the simple message ministers are developing. And with growth returning, and forecasters dusting off forgotten skills of how to revise upwards, some say the coalition has a point. So should the critics of austerity – such as the TUC, which meets in our annual congress next week – give up?
The answer is a decisive no. There are many reasons to quibble with claims of a boom. Government strategy has delayed a return to growth, which is still precarious as so much is based on a house price bubble and credit card loans. We are still some way off returning to where we were before the crash, let alone catching up on what we have lost since. Getting back to the trend rate of growth is no great achievement – and we are not even there yet. The limited growth we are seeing is passing many parts of the country by as regional inequalities grow and living standards shrink.The answer is a decisive no. There are many reasons to quibble with claims of a boom. Government strategy has delayed a return to growth, which is still precarious as so much is based on a house price bubble and credit card loans. We are still some way off returning to where we were before the crash, let alone catching up on what we have lost since. Getting back to the trend rate of growth is no great achievement – and we are not even there yet. The limited growth we are seeing is passing many parts of the country by as regional inequalities grow and living standards shrink.
But while all these – and more – arguments are valid, the worst thing we should do is pretend that nothing has changed. There is definitely more optimism about. We are no longer counting dips. Confidence is always key to recovery, and even modest growth will encourage the kind of decisions by consumers and businesses that lead to further spending.But while all these – and more – arguments are valid, the worst thing we should do is pretend that nothing has changed. There is definitely more optimism about. We are no longer counting dips. Confidence is always key to recovery, and even modest growth will encourage the kind of decisions by consumers and businesses that lead to further spending.
This poses a challenge to government critics. Balancing a recognition that we are now on an upwards trajectory with the necessary challenges about why we have had to wait so long requires both judgment and care that we do not get too far from the national mood.This poses a challenge to government critics. Balancing a recognition that we are now on an upwards trajectory with the necessary challenges about why we have had to wait so long requires both judgment and care that we do not get too far from the national mood.
Yet I see a bigger problem for the government. Up to now it has got away with shrinking the state and reducing the public realm by claiming that there is no alternative. Voters have never accepted that the cuts are being implemented fairly, but there has been a consistent majority that they are necessary, if too deep and too fast. Voters bought the government's claims that the nation had maxed out its credit card and must now pay it back through cuts and austerity.Yet I see a bigger problem for the government. Up to now it has got away with shrinking the state and reducing the public realm by claiming that there is no alternative. Voters have never accepted that the cuts are being implemented fairly, but there has been a consistent majority that they are necessary, if too deep and too fast. Voters bought the government's claims that the nation had maxed out its credit card and must now pay it back through cuts and austerity.
But growth undermines that argument. More economic activity brings in more tax. Even those who agree that the deficit is the only priority will be open to change when optimism returns. When pollsters have asked if the government should make good the damage done by cuts or keep spending down permanently once the economy recovers, voters have opted for better services. The mood seems to be that we need to get through the pain but as a price to be paid, not the end of a journey.But growth undermines that argument. More economic activity brings in more tax. Even those who agree that the deficit is the only priority will be open to change when optimism returns. When pollsters have asked if the government should make good the damage done by cuts or keep spending down permanently once the economy recovers, voters have opted for better services. The mood seems to be that we need to get through the pain but as a price to be paid, not the end of a journey.
The even bigger challenge to the government's narrative is that growth opens up a whole new question of where the proceeds should go. Saying "we cannot afford it" will no longer work as a default answer. Borrowing for a mass housebuilding programme has made sense throughout the depression, but more easily overcomes the "unaffordable" objection when wealth is being generated. Advocating the investment that can secure sustainable growth will become easier if recovery beds in.The even bigger challenge to the government's narrative is that growth opens up a whole new question of where the proceeds should go. Saying "we cannot afford it" will no longer work as a default answer. Borrowing for a mass housebuilding programme has made sense throughout the depression, but more easily overcomes the "unaffordable" objection when wealth is being generated. Advocating the investment that can secure sustainable growth will become easier if recovery beds in.
There have always been two things wrong with the government's economic strategy. Taking demand out of the economy during a recession was the worst possible policy. But as growth returns, the second flaw is exposed. The economic model that developed in the 1980s is bust. Letting the market rip, weakening unions, undermining welfare and caring little about inequality had stopped delivering for the majority even before the crash. "Whose growth?" is the new central political question.There have always been two things wrong with the government's economic strategy. Taking demand out of the economy during a recession was the worst possible policy. But as growth returns, the second flaw is exposed. The economic model that developed in the 1980s is bust. Letting the market rip, weakening unions, undermining welfare and caring little about inequality had stopped delivering for the majority even before the crash. "Whose growth?" is the new central political question.
The longest squeeze on living standards since the 1870s began before the crash. It is now biting hard, as millions of families struggle to pay their bills. People who now grumble, while accepting the argument that there's no money in the system and that we must all tighten our belts, will start to get angry if growth returns but they are excluded. Employers will find it harder to increase profits while holding wages down.The longest squeeze on living standards since the 1870s began before the crash. It is now biting hard, as millions of families struggle to pay their bills. People who now grumble, while accepting the argument that there's no money in the system and that we must all tighten our belts, will start to get angry if growth returns but they are excluded. Employers will find it harder to increase profits while holding wages down.
The challenge is to build a new economy that delivers good secure jobs with decent wages. It must reduce the gap between ordinary families and the soar-away super rich. And we need to renew decent services – and include the social care and childcare omitted from the Beveridge-Attlee settlement – that underpin a good society.The challenge is to build a new economy that delivers good secure jobs with decent wages. It must reduce the gap between ordinary families and the soar-away super rich. And we need to renew decent services – and include the social care and childcare omitted from the Beveridge-Attlee settlement – that underpin a good society.
I for one welcome that new terrain. For while renewing our economic model is no easy project to be summed up in a few glib election promises, it still offers a politics of hope and aspiration. Advance is always better than the defence of damage limitation. And I first joined the trade union movement to make progress, not to hold our ground.I for one welcome that new terrain. For while renewing our economic model is no easy project to be summed up in a few glib election promises, it still offers a politics of hope and aspiration. Advance is always better than the defence of damage limitation. And I first joined the trade union movement to make progress, not to hold our ground.
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