h1

Can the country get used to a long and slow squeeze?

January 5th, 2013

David Herdson on the politics of austerity

Experts and others making New Year predictions are as much a tradition at the turning of the year as fireworks, soon-to-be-broken resolutions and loud but not entirely coherent renderings of Auld Lang Syne. Except where change – or at least, the clear opportunity for change – is scheduled, these predictions inevitably default to ‘much the same as last year’, and it’s almost certainly on that basis that both the government and opposition will be preparing their arguments for the year (and more) ahead, particularly when most economists see another year of minimal growth in 2013.

    What that argument essentially boils down to is the claim from the opposition that the government’s making life harder for ordinary people while protecting privileged groups, against the government’s that its measures are necessary and fair given its inheritance.

Both cases will no doubt continue to be made for several years yet, irrespective of which party or parties are in power and which are in opposition, for the simple reason that the bubbles built up in the last decade cannot be deflated quickly without causing a crash and cannot be quickly reflated while memories of the last recession remain a constraint on the actions of banks, regulators and investors. The sustainable route out – that of earned growth replacing that of borrowed spending – will take years to achieve and even if it does, interest rates rising back to normal levels will take the edge off any feel-good factor. The reality for all parties is that even if the country can avoid another crash, nominal growth will remain subdued for years.

So what then are the politics of austerity, not just of today but for the foreseeable future, and certainly well into the next parliament? They probably fall into two parts: the politics of yesterday and today, where the government is most under pressure, and those of tomorrow, where it’s more difficult for the opposition.

Governments naturally come under pressure for the decisions they take, all the more so when there are clear losers from them. To that extent, it might have been better to impose a freeze on benefits rather than introduce a tiny rise: that rise is visible and easily resented, while a freeze is felt over time and offers no focus for disquiet beyond the decision itself. It should be easy enough for an opposition to ride the wave of discontent against the government at decisions already taken or in the pipeline.

Where it becomes harder is in response to the question about what Labour would do instead, and elections are of course a choice between parties, not a referendum on any one’s popularity in isolation.

    Does Labour imply it would ease the burden on the average voter by spending more, taxing less or not making cuts, or does it try to argue that it would do austerity better?

In either case, will the public believe the promise is deliverable? Jam tomorrow is a nice promise if the public believe it can be achieved; if they don’t, any party proposing it loses credibility. Indeed, it’s surprising that the government hasn’t made more of ‘black holes’ in Labour’s proposals as a counter-narrative. It is true that the government’s also missed deficit-reduction targets but that only adds to the point that there’s no money to splash about. After all, winning the politics of austerity is the key to winning the 2015 election.

David Herdson