The Guardian view on Labour’s gloomy politics: it is bad economics

“I didn’t want to means-test the winter fuel payment,” said Sir Keir Starmer, referring to the small amounts of cash paid to eligible pensioners to help them get through the cold. “But it was a choice we had to make. A choice to protect the most vulnerable pensioners, while doing what is necessary to repair the public finances.” The policy is expected to take the payments – worth between £100 and £300 – from 10 million elderly people, just when bills rise by 10%, saving the Treasury £1.4bn this financial year. How such a meagre sum will pay – as the prime minister claimed – for a “functioning NHS”, which runs on a budget of £182bn, is unclear.
But Sir Keir’s speech was about politics, not economics. If the government continues in this vein it will be cutting department budgets and taxing people more. That is the definition of austerity. Sir Keir might be attempting, misguidedly in our view, to popularise this notion by taxing the rich – in his words those with “broadest shoulders should bear the heavier burden” – while claiming to inflict spending cuts that miraculously don’t impact frontline services or only affect those close to Tory hearts.
In a blog, the economist Bill Mitchell suggests Labour’s strategy will do no good. He notes that in the last six months, Britons enjoyed higher incomes, largely driven by public spending. The UK’s deficit position and public spending is also in line with comparable rich countries – and nowhere close to being, as one cabinet minister claimed, “out of control”. Prof Mitchell writes that the “only way the British economy can sustain growth at present with the planned fiscal cutbacks is if the private domestic sector plunges into deficit and builds up ever increasing levels of debt. It is a recipe for disaster.”
This is not just a battle over words. It is a fight over what this Labour government is for. Last week, Rachel Reeves told this newspaper that by giving public sector workers a pay rise, her policies were “not austerity”. That’s not what the dictionary says. There’s many a slip twixt the cup and the proverbial lip. The current debacle, however, over the chancellor’s refusal to lift the two-child benefit cap suggests she wants a fight. There’s still time for a change of heart. Perhaps Ms Reeves will eventually prove herself right with a series of judicious sideways moves, or just straightforward U-turns. A voter backlash at the decision to scrap the universal winter fuel allowance for pensioners has reportedly sparked a cabinet split.
It is natural that Sir Keir’s team wants to pin the blame for broken Britain on the shambolic Tories. But it has yet to form its own, more hopeful, narrative. This has been seen by many as a weakness, but by Labour’s leadership as a strength. Labour, under Sir Keir, does not appear to want to be beholden to concrete ideas – especially sunny ones. Its missions sprawl over government in such a way to signal that voters ought to stay at home while the party gets on with governing. Yet the public cannot miss the pall of gloom spreading out from Downing Street. Sir Keir warned of a painful October budget, saying that he had “no other choice”. But without a sense of hope and progress, Labour will court unpopularity. How much a government needs to borrow and spend should be determined by the state of the economy, not by how much debt its predecessor has left it. Labour would do best to remember this.