The perfect storm for Labour

Ed Miliband had probably other things in mind when he cheered the arrival of 2012. So far the New Year brought nothing but bad news for him. First, Liam Byrne declares that the government's reform of housing benefit may have some merits (read his Guardian article HERE). Then Lord Glasman, a Labour peer and former (occasional) advisor to the Labour leader, says Miliband lacks a narrative and a strategy (you can read it HERE). Finally, even the Guardian abandons its strict loyalty to the Labour message of ‘no cuts’ and questions the credibility of Labour’s long term budgetary policy in several articles. 

While some of Miliband’s supporters try their best to shield the party leader who looks more beleaguered by the day, the real challenge is still in the offing. So far, as the deputy editor from the New Statesman pointed out in a Newnight piece, Ed Balls’ strategy of accusing the government to cut ‘too deep and too fast’ has been the main message. The problem is that Balls’ strategy was predicated on the Darling deficit reduction plan to work, which anticipated to cut half the deficit in four years (to 2015) and too eliminate it by 2019. 

Yet the Darling plan is as dead in the water as any financial projection could ever be that is about two years old. In December, the government announced that, given the threat of another global economic slowdown, the government’s stricter deficit reduction plan has to be revised to, wait for it, a reduction plan that is slower even than Darling’s plan. 

Which means that Labour has lost the wobbly flagpole it wanted to peg its budget plans to. With Darling’s plan gone, it has little to build its economic credibility on. Which brings us back to Ed Miliband and his critics. He is now in an even tighter spot than last year. With no deficit reduction plan and a shadow chancellor determined to ‘spend, spend, spend’, Labour gets ever further from re-gaining some traction with the public in the economic debate. The real challenge however still awaits Miliband and his team. There seems to be a consensus emerging that the discussion around ‘how deep to cut’ is nothing more than a sideshow. 

The more pressing question is how to structure public services in times of lasting austerity. There is no tool in the shadow chancellor’s toolbox that could match tight fiscal conditions. Balls is a Brownite; his understanding of economics is one formed in times of plenty: plenty of tax revenues equals plenty to distribute. This mismatch between Balls’ perspective and the reality of austerity for the next decade spells disaster for the Labour leader. If Miliband does not push Balls to accept the basic parameters of austerity, he will struggle to open up the debate on the things that really matter: how to organise public services more efficiently to prepare them for austere times. 2012 just may be the year the Labour leader encounters the perfect storm. It all depends on his leadership if the Labour ship sinks or stays afloat.