Anyone can make a mistake. Even politicians have a right to change their minds. It helps, though, if you reserve your errors for trivial matters. It helps a bit more, when the volte face becomes inevitable, if you understand why you were wrong to begin with.
Yesterday, Labour people who are not necessarily his friends were putting it about that John McDonnell, the shadow chancellor, had not grasped the issues when he signed up for George Osborne’s fiscal charter. Chiefly, he had not spotted an obvious trap. Now, after throwing himself into reverse, Mr McDonnell has to prove that he understands basic arguments.
The Chancellor is proposing a measure that will – so he says – oblige governments further down the line to run budget surpluses except in particular (and extreme) circumstances. If Labour goes along with it, self-evidently Mr Osborne wins: his opponents have recanted. All previous criticisms will, supposedly, become void.
If Labour adopts the Scottish National Party’s position and votes against him today, however, the Chancellor will still call it a victory. Modestly, he will present himself as firm, determined and consistent. Critics will be dismissed once again as a bunch of deficit-deniers, happy to shout about evil austerity but incapable of putting forward a clear alternative.
In the Tory version, shared by Mr McDonnell’s Labour enemies, the man who trumpeted a socialist alternative to misery has gone from one muddle to another. Ben Bradshaw, the MP who denounced Monday’s Labour parliamentary meeting as “a f****** shambles”, would probably have said something of the sort sooner or later. Some of his colleagues were following the McDonnell line and were cast adrift.
Their worry now ought to be simple. If the shadow chancellor has decided to take on Mr Osborne he had better know what he means to say and why he means to say it. Yesterday, it was none too clear that those conditions will be met. The followers of Jeremy Corbyn and Mr McDonnell can point out that they are at least prepared to oppose the Government. Labour had almost lost that habit. But brave intentions do not amount to a critique.
In a letter to Labour MPs, the shadow chancellor says there is a big difference between the budget responsibility charter and fiscal mandate the party agreed to support in January and what is being presented today. That’s true. But it was true when Mr Osborne was putting forward his budget and revised fiscal charter in July.
Mr McDonnell then seems to say that he wanted to vote with the Government to mark Labour’s seriousness over “the principle of tackling the deficit”, but discovered that an amendment to preserve capital investment would not be possible. This translates as “matters have moved on and we should now vote against the order”.
So the great Corbynite anti-austerity crusade seems to rest on an argument over capital investment. Mr McDonnell meanwhile notes evidence that emerging markets around the globe are slowing down. He observes that “divisions” over the Chancellor’s assault on tax credits “are just the first example [sic] of what we can expect”. To “underline” Labour’s anti-austerity credentials, therefore, a vote against the Government is required.
This is waffle. For it to add up you have to believe that Mr McDonnell has just heard about the tax credits issue, Mr Osborne’s plans, problems in China and elsewhere, and the fact that Mr Corbyn was elected Labour’s leader because he vowed to oppose – with Commons votes and the like – the Tory austerity programme. Besides, there was a perfectly good reason for the shadow chancellor to take on his opposite number from the kick off: the measures to be proposed tomorrow are puerile nonsense.
Mr Osborne is one of those self-proclaimed realists who dislikes dealing with reality. Yesterday he greeted the news that the Consumer Prices Index (CPI) once again showed negative inflation in September with a tweet hailing “a real boost for budgets of working families”. Presumably he didn’t want to tell them that their debts, like the country’s debts, will be harder to service if the phenomenon persists.
For that matter, Mr Osborne authorised no tweets on negative inflation and falling consumer spending. He didn’t remind anyone that deflation pushes up real interest rates – thus saving the Bank of England the bother – and is associated with economic stagnation for good reasons. Above all, the Chancellor did not let on that the CPI figure marked a trend across the Western world, one that is the opposite of good news for anyone interested in growth.
In this game, irrespective of Tory posturing, Britain is as European as they come. Thirteen countries in Europe (and Iceland) showed negative inflation in August/September. Sweden and Spain were negative on an annualised basis. Germany and France, zero and 0.32 per cent in August, 0.19 per cent and 0.05 per cent respectively on an annual basis, were not far behind. Inflation in the United States was down to 0.19 per cent.
Granted: oil prices have dropped by a huge amount. This is no doubt a “boost” for consumers. It also marks a severe lack of demand around the world. Negative inflation in Austria, Norway or Poland is not testimony to Mr Osborne’s genius. Index-linked public service pensions, disability allowances and other payments tied to a September CPI benchmark are another matter. But if inflation is your guide and two per cent the universal target, things are not looking too bright.
Does Mr Osborne propose a programme for growth? How about some housebuilding, of which we hear so much? How about – for this is not trivial – dodged corporate taxes? Why obsess over a surplus – achieved in only five of the last 40 years – instead of making use of fantastically low interest rates? Why, indeed, the fanatical desire to lock in austerity?
The Chancellor’s mandate for fiscal policy is supposed to apply in “normal times”, yet his justification for deep spending cuts is that these are not normal times. That also happens to be why he has postponed pursuit of an annual surplus until after 2020, when the next election will be out of the way. His charter is not simply irrelevant; it is a dangerous distraction from real arguments over debt, deficits and growth.
But then, Mr Osborne probably does not mean a word of it, as everyone – with the possible exception of Mr McDonnell – has noticed. The timescale is the clue. The Chancellor means to trap Labour, but he intends the rest of us to go on talking and thinking as if there is a single choice between cuts and deficits. And the cuts, to Tory satisfaction, continue.
Mr McDonnell now maintains he has altered his tactics, not his policy. Any voter bemused by that can take a look at Labour’s own promised fiscal charter. There is no such thing, as yet, but that’s probably for the best. The shadow chancellor will not have to change his mind again, at least for a while.
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