How Osborne abandoned social mobility

By Louie Woodall.

The words and deeds of this government have rarely been in alignment. However, the gulf between aims and actions is at its starkest when it comes to the goal of greater social mobility.

This mission is supposed to be at the heart of the Coalition’s strategy for creating a fairer Britain, one where a child’s life chances are not dictated by the class and income of their parents.

Yet this laudable policy was grossly absent in last week’s budget. Despite the bluster that this was a budget designed to reward hardworking people, the policy announcements that look like routes out of poverty at first, on closer inspection are nothing more than dead ends.

Take childcare. The government trumpeted its additional spend of £150 million on childcare vouchers as proof of its commitment to remove barriers into work for hard-up families. But an analysis of the distributional impact of the policy reveals that fully 80% of the earmarked funds will go to parents  already in the top half of the income scale. Worse, part time workers will receive nothing under the scheme.

What about Osborne’s celebrated help to buy mortgage guarantee scheme? This was the one part of his Budget speech he singled out as a means to boost social mobility:

“The deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution. That’s not just a blow to the most human of aspirations – it’s set back social mobility and it’s been hard for the construction industry. This Budget proposes to put that right – and put it right in a dramatic way.”

Going beyond the strange idea that home ownership = social mobility in the first place, again the benefits are skewed in favour of the better off, (those earning above the median wage)- and even they will struggle to make use of it.

Housing charity Shelter explains that the mortgage guarantee fails to tackle the problem unaffordable homes at its roots, Robbie di Santos says:

“The trouble is, while this makes it easier to get a deposit, you’d be borrowing 95% of already very high house prices, which are way out of kilter with what ordinary people earn. Our calculations – again based on local house prices and local double income households – suggests that the Help to Buy mortgage guarantee would bring the average local home within reach of the average double income household in only 16% of the country.”

Are these the actions of a government committed to a fairer distribution of opportunity across the income scale?

It certainly doesn’t look like it to me. Some argue that faith in social mobility as a weapon against rising inequality is misplaced, and that we should measure our progress in becoming a fairer and more civilized society by how far apart the richest and poorest stand on the income scale rather than by how easy it is to get from one end of that scale to the other.

However, if we understand social mobility as a mechanism for empowering the very poorest to escape the poverty trap, than it does have the potential to change lives and transform society.

Sadly, in the Budget this government has proved it is far, far away from working towards such an end.

Louie Woodall is Editor of Anticipations.

Welfare Bill hitting working families hardest

 By Martin Edobor.

The Government has set out their plan to get the unemployed back into work, through encouraging responsibility in the welfare system and supporting those who are looking for work with training.

Earlier this week the Government’s benefit bill aimed at capping welfare spending at 1% up until 2016 passed 324 votes to 268 a majority of 56. George Osborne’s rhetoric in his Autumn Statement reveals the Coalition’s thinking behind the bill; the hope that reducing welfare spending will impact ‘scroungers’ and benefit cheats, forcing them back into the workplace. The Government’s rhetoric is harmful to the debate, and their policies are simply hitting the poorest.

Cost for welfare is set to be over £13 billon higher than what George Osborne planned as the Government’s work programme is failing. Last year just 2 in 100 jobseekers were helped into sustained employment; this coupled with a poorly performing economy and rising unemployment has caused the Welfare Bill to skyrocket.

The key mis-step of the Government was their decision to scrap Labour’s successful Future Jobs Fund which helped to get unemployed young people back into work.  In addition, cuts to childcare support for working parents, and unfair changes to tax credits mean that families are not being supported into jobs.

With an economy lacking growth, the Tory-led Government has chosen to make millions pay for their economic failure. George Osborne has given a £3 billion tax cut to the richest, instead of focusing on the unemployed and working families.

Labour must continue to place pressure on the Government, and act as the voice for working families.  However rhetoric alone will not be sufficient, with 2015 not too far off Labour must provide real policy alternatives.

Martin Edobor is the Social Secretary of the Young Fabians.

What is ‘pre-distribution’?

A new buzzword is being whispered in the corridors of parliament and the inner sanctums of progressive think-tanks.

That word is ‘pre-distribution’, and those who utter it suggest it could not only win Labour the 2015 election, but build the elusive ‘moral capitalism’ that all parties seem to crave.

The idea behind ‘pre-distribution’ is that the government takes action to arrange how the market allocates its rewards. In essence, it simply relocates the focus of government intervention. Instead of redistributing the wealth of the economy after it has been generated, governments would act to channel it in a more equitable way in the first place.

According to the Smith Institute, ‘pre-distribution’ has a proud history. In the post-war period, trade unions, collective bargaining, and corporate governance arrangements all acted as agencies of ‘pre-distribution’, ensuring that the wealth of the free market was fairly shared out.

These agencies died out in the wake of deregulation and legislation that robbed unions of their economic power. Today, ‘pre-distribution’ is seen as something that the government should take responsibility for, through effective law-making and the careful regulation of business.

The Policy Network describes “policies governing financial markets, the rights of unions and the pay of top executives” as areas in which a ‘pre-distributive’ approach could reap dividends.

Abolishing banker’s bonus and linking the salaries paid to executives to those paid to the lowest earners within companies are two simple ways in which the wealth generated by the market can be channelled away from the pockets of the already super-rich and spread more fairly across the labour force.

A radical overhaul of banking regulation based on ‘pre-distributive’ principles could also have a long-term impact on how the financial powerhouses allocate their capital. Current proposals recommend that the ‘big four’ banks in the UK separate their high-street retail banking services from their investment banking activities. However, these reforms do not incentivise banks to invest in small and medium-sized enterprises (SMEs), or into those struggling areas of the economy- like the green sector- that desperately need a boost of finance capital to capture market share.

This could be remedied if banks were mandated to use a percentage of their profits to create regional ‘mini-investment banks’ to furnish struggling local businesses with the loans they need to tackle the current economic turbulence. Such services could be set up very quickly- each bank could choose to convert a single high-street branch in each town it has a presence into a ‘mini-investment bank’ for one weekend a month, until more permanent arrangements can be made.

The virtue of ‘pre-distribution’ is that it does not rely on unpopular policy devices like taxation and benefit provision, the standard tools of ‘redistribution’. Yes, Labour has to continue to work to change the culture of resentment that prohibits governments from making the case for higher taxation and an equitable welfare system. Yet at the same time this does not prevent the party from tackling the inherent inequalities of capitalism from a different angle.

A word of caution, however. ‘Pre-distribution’ cannot be held up as the holy grail that modern social democrats have been searching for. Some may believe that championing pre-distributive methods to reallocate wealth is enough to satisfy the short and long-term goals of the Left. However, it cannot distract from the fundamental aim of progressives throughout history- to engineer the transfer of economic and social power from entrenched elites to the public at large.

Louie Woodall is Assistant Editor of the Young Fabians Blog

The Fabian New Year Conference 2012: An Economic Alternative?

On Saturday 14th January, the Institute of Education in central London played host to the 2012 Fabian Society New Year Conference.

Hundreds of Fabians attended the all-day event, which featured some of the leading lights of the British Left and a selection of some of Labour’s most prominent frontbenchers.

This year’s theme was ‘The Economic Alternative’. Unsurprisingly, I left the conference with a sense that the Left is not offering just one alternative to the Coalition’s programme of unchecked austerity, but several, each occupying a different space on the political spectrum.

The alternative offered by Labour was set out by Ed Balls in his keynote speech. To the acclaim of some, and the horror of others, he made it clear that Labour would not reverse the cuts imposed on the country by the Tory-led government. However, in contrast to the Coalition, he did promise that the party’s focus would be fixed firmly on job creation rather than blind deficit reduction.

The overall impression received from those representing the Labour party on Saturday – which included Rachel Reeves and Chuka Ummanu – was that they were firmly sticking to their leader’s view. As Ed Miliband explained earlier last week, regardless of the Coalition’s performance over the coming three years, the next government will still inherit a deficit and in consequence have few spending options available to them. A future Labour government, therefore, would be a government of austerity too.

The need for Labour to allay suspicions that the party is, in Ed Balls’ words, “out of tune with the public mood” on the deficit is obvious from the view of narrow, immediate political interest. But as Sunny Hundal explains, by shifting the debate onto Tory territory, Labour instantly puts itself at a disadvantage. Labour will never look comfortable using the language of ‘fiscal conservatism’, or be able to dislodge the country’s preference for Conservative stewardship of the economy by promising “tough decisions on tax and spending”.

Historically, Labour has a poor record on economic management. From the historic debts of 1945 to the strikes and public sector strife of the 1970s, Labour has either inherited or created dire economic circumstances. Even New Labour, which was unique among Labour governments in presiding over eleven years of GDP growth, failed the economic test in the end when the financial storm broke. The Conservatives will always be able to claim that they are the party to be trusted with the economy when times turn hard. A Labour party promising to ‘out-macho’ the Tories will always struggle to make headway.

Other Left thinkers offered alternative visions of a future progressive approach to the economy. Caroline Lucas MP, leader of the Green Party, argued against our current economic model and stated her support for the introduction of alternate measures of national prosperity based on citizens’ perception of their own well-being and consideration for the environment. She also impressed on the audience the need to redistribute the existing wealth in society through a programme of progressive taxation and capital investment in Green infrastructure projects. The applause she received from the conference rivalled anything Ed Balls mustered, suggesting that the Left is not ready to pull on the hair-shirt of austerity just yet.

What I discovered throughout the conference is that Fabians responded better to policies and positions that promoted positive messages. Chuka Ummuna MP struck a chord by arguing that the British economy needs to be geared towards ‘pre-distribution’, and shaped in such a way that the proceeds work to lessen inequality rather than exacerbate it. The conference warmly acclaimed Will Straw’s pitch on the need for a National Investment Bank to fund SMEs, embracing the positive message that even a little investment could go a long way to transforming the fortunes of those trying to make their way through the economic turmoil.

Effective intervention, equality and redistribution were the buzzwords of the day, and if any consensus emerged from the conference it was that the economic alternative would have to reflect these three values. Let us hope that Labour’s more positive messages on jobs, ‘pre-distribution’ and ‘a responsible capitalism’ can shift the debate onto the Left’s territory, and force David Cameron to fight on our ground and on our terms.

If you were at the 2012 Fabians Conference and want to share your thoughts on the blog, please contact the team at: blog@youngfabians.org.uk

Louie Woodall is Assistant Editor of the Young Fabians Blog

‘In the Black Labour’: A roadmap to defeat?

Louie Woodall responds to Stephen Boyle’s argument for a new economic strategy based on ‘fiscal conservatism’.

The question absorbing Labour leaders, activists, and think-tanks alike is how the party can earn back its economic credibility. Recently, a quartet of Labour thinkers published ‘In the Black Labour’ , which offers one answer to this question. However, the paper does little to advance a distinctive economic strategy that traditional voters and activists can relate to, and does even less to bolster Labour’s chances at the next election.

The fundamental problem with ‘In the Black Labour’ is that it does not provide the alternative narrative that an opposition is supposed to offer the electorate. The authors are essentially trying to sell the electorate the same product pedalled by the Coalition: austerity, a small state, and the fictitious ‘Big Society’.

By placing ‘fiscal conservatism’ at the heart of its strategy, ‘In the Black Labour’ cedes the moral argument on the economy to the Conservatives and attempts to move the party onto the Coalition’s turf. It is easy to see why this would be an attractive course to take in the current political climate. November polling revealed that some 30% of respondents still blame the debts racked up by the previous Labour government for the continued economic slump

However, it also revealed that 46% believe Osborne needs to slow the pace of austerity, and that 35% favour a programme of public works to create jobs. Labour needs to remember that by 2015, the Coalition will no longer be able to capitalise on the excuse that their failures originated in the actions of the previous government. Osborne would have had a full term to place the country on the road to economic recovery, something which many indicators suggest he is far from achieving. Telling the electorate that it favours the government’s strategy but disagrees on the tools to achieve it will make Labour look uninspired and shallow to the victims of the Coalition’s policies.

By promising rigid controls over future budgets, the authors miss the opportunity to excite the electorate with a positive vision of economic growth. It is difficult to convince people that by cutting the deficit, more jobs and higher wages will follow. Labour should instead promote a programme of public works, with a focus on housing and infrastructure, and continue to sponsor the ‘green industrial revolution’ promised in the last manifesto. The Coalition is making tentative steps in these areas, and Labour should steal a march on them by promising a much more extensive campaign. ‘Effective Keynesianism’ can be sold to the electorate without recourse to fiscal conservatism.

Labour should not shackle itself to the same ideology dictating the actions of the Conservatives by promoting macho fiscal discipline over the more desirable aim of a resurgent economy. It should not reject deficit spending outright just to win back the votes of the City. The very idea that any government could commit to producing a budget surplus within a fixed timescale- as suggested by the authors of this pamphlet- is ludicrous considering the volatility of national and international economies. Setting targets that cannot be realistically met is an own goal in politics- just look at Osborne’s current woes.

Labour is suffering a crisis of identity, and every centre-left thinker is casting around for a narrative it can adopt that fits with the party’s heritage, while accommodating the current economic reality we face. ‘In the Black Labour’ seeks to gain the party short-term popularity by copying the Coalition’s approach to the public finances and planting the red flag squarely in centre ground. The authors should remember that the centre ground is always in motion, and may be some way more to left by 2015 than it is now if Tory policies fail to achieve their objectives.

Louie Woodall is a member of the Young Fabians and Assistant Editor of the Young Fabians Blog

The Squeezed Middle: How To Build A Fairer Economy

In this member post, Jeevun Sandher – a member of the Young Fabian Renewing and Reforming our Economy Policy Commission - reflects on how Labour can build a fairer economy.

Most of us have a vague idea of what the “squeezed middle” is. However, a precise definition seems to elude many in the Labour movement. Understanding precisely who this group is and designing economic policy to promote their interests is the key to building a fairer economy.

To define the “squeezed middle” we could do much worse than to look at the work of the Resolution Foundation, an organisation working to improve the lives of people with low-to-middle incomes. For them, this group constitute about 11 million working adults who tend to earn less than the median income but are above the bottom ten percent in the income distribution.

In short, they are people who are neither too rich nor too poor. They are too wealthy to get substantial state support, but too poor to flourish in an open market economy. Increasing amounts of them are unable to buy homes, and struggle with household bills. More than half have less than one month’s income in savings and face comparatively higher rates of inflation (due to the basket of goods that they buy).

However, the real tragedy for the squeezed middle is that while the economy grew by 11 % between 2003 and 2008, the median wage remained static. At the same time, those on higher wages saw their pay packets increase and executive pay rose exponentially. The squeezed middle saw their living standards reduce at a time when the economy grew and productivity rose, giving the lie to the neo-liberal idea that people are paid their “marginal product” – that the wage chosen by the market is a fair wage.

This problem runs straight to the heart of Labour’s “fairness” strategy. By and large, these are people who work hard, do the right thing, but still struggle to stay afloat in an increasingly precarious economic climate. Meanwhile, CEO’s saw their pay rise dramatically in the decade before the financial crisis and bankers continue to take home multi-million pound bonuses.

The challenge for Labour at the next election is to construct a vision that rewards hard work and shapes a free and fair economy. There is no silver bullet, however. What is needed is a raft of policies to build an economy in which all gain when there is growth.

To begin with, those in the squeezed middle tend to be those with low-to-medium level skills. Any economic strategy must be focused first on investment in education, in order to build up human capital. Given the increasing returns to education we have seen in the past 30 years, this is just common sense.

However, it is important to note that this does not merely mean reducing tuition fees. As a recent IFS study has pointed out, those with similar A-level grades tend to go to university in the same proportion but it is much less likely that the poorest students will get the top A-level grades. Earlier intervention is key (e.g. Sure Start, the pupil premium etc.) to promoting social mobility and building people’s skills.

But this should just be the beginning. For too long Labour has accepted the Thatcherite free market consensus as gospel, and only aimed to tweak it at the edges to help those on low to middle incomes with measures such as tax credits and lower basic tax rates.

It is time to consider and undertake more radical measures. We must design policies which create better corporate governance structures as well as more accountability and transparency surrounding pay in the private sector. Only then can we ensure that all people will share in the proceeds of growth and be paid a fair wage. Hopefully, with these goals in mind we can create a compelling economic vision that helps us win the next election.

Jeevun Sandher is a member of the Young Fabian Reforming and Renewing our Economy Policy Commission.

Blueprint for a New Economy

In this Guest Post, Bren Albiston, a member of the Young Fabian Renewing and Reforming Our Economy Policy Commission, explores the ways in which we can change the way the country does business.

We have a big decision to make as to what future we want for this country.

Do we want to continue ever further down the road of an economic system that rewards rent-seeking more than productivity? Do we want to sustain an unfair system that generates friction between the Square Mile and the rest of the economy?

No. We can, and need to, improve this sorry state of affairs.

We have to grow our economy at more than 3% a year until 2035 in order to make up the losses incurred from the double-whammy of the credit crunch and recession. If we fail, we will lose something in the order of £4 trillion of productivity* . The task may seem insurmountable, but we must work to secure as much of that 4 trillion as we can.

Our capitalism is broken. This has been made clear by years of recession and static growth. We continue to pay the price of other people’s hubris; those who thought they could predict the unpredictable.

Despite this, we are still over-reliant on a financial system that is too cautious to invest. At the same time, the government is scaling back the public sector, our most potent means of inducing social mobility. We must reinvent the way we do business and the way that we create and encourage growth, not just because we need to recover economically, but because we need to recover socially as well.

Britain should not be afraid of taking the lead in reform. There are many ways in which the nation could change the way it does business. The establishment of a properly funded and empowered ‘Green’ investment bank is one option. As Will Hutton suggests, we should explore the benefits of a ‘Knowledge Bank’, a ‘Life Sciences Bank’ and perhaps a ‘National Infrastructure Bank’.

Through these institutions, we can invest in the technologies and expertise required to rebuild our economy. A new lending infrastructure will incentivise innovation, while benefiting traditional funding streams at the same time.

The new system would channel funds to those areas that are thought to be risky bets by orthodox lenders. However, it would need the backing of the state to succeed. It alone can provide the security and effective strategic direction needed, alongside a highly autonomous set of investment apparatus to keep its influence in check.

Fairness and just desserts should be the foundation stones of our new capitalism. In many ways, small business does more for this country than big business. At present, we neglect the small- and medium-sized businesses and leave them exposed to the predatory practices of our largest firms.

These giants operate largely unchallenged by both smaller competitors and government watchdogs. A study in 2005 revealed that the more competing firms were matched in terms of performance and productivity, the more they tended to register new patents** . We need a competition framework that actively promotes competition rather than protecting incumbent corporations.

Unfortunately, the balance between today’s consumers and tomorrow’s is too heavily in favour of the former. In consequence, there is little room for innovation and even less for emerging companies to replace those which are uncompetitive. We need an infrastructure capable of sustaining new corporate growth and innovation.

Britain is, in many respects, a world-leader in high technology and services. Yet as our manufacturing sector continues to decline, we remain over-reliant on financial institutions as the engines of growth. As the state retreats from its key role in encouraging social mobility, we are faced with a huge task: we need to reconstruct our capitalism to benefit society, and we need new institutions to help us do that.

• You can learn more about what the ‘Renewing and Reforming Our Economy’ Policy Commission has been doing by clicking here.

* H.M Treasury (2009) Pre-Budget Report: Securing the Recovery: Growth and Opportunity, HMSO. See Also: Will Hutton (2010) Them and Us. Little, Brown.

** Phillippe Aghion, Richard Blundell, Rachel Griffith, Peter Howitt and Susan Prantl (2005) ‘The Effects of Entry on incumbent Innovation and Productivity’, CEPR Discussion Paper No. DP5323.

Why we can’t turn into ‘part-time Britain’

Young people need to show they care about the type of jobs that are being created and not just the numbers.

Yesterday’s labour market figures are truly depressing. 38,000 more people unemployed than the previous quarter, 2.49 million people without work.  It puts Eric Pickles’ trumpeting of the Government Enterprise Zones, with the promise of 30,000 jobs by 2015, into perspective.

As David Blanchflower predicted last month, the Prime Minster is going to have to do some nifty footwork given his assertion that unemployment will fall each year this Parliament; both the PM and the Chancellor have been given their come-uppance.

But policy makers and politicians need to be mindful of the longer term social effects of this economic pain. George Eaton has pointed out the five worrying trends in the published figures but there are two areas Young Fabians should be especially concerned about:

1) Youth unemployment continues to rise and it is lasting longer –

One in five economically active 16-24 year olds are not working. A massive 39 per cent of have been unemployed for over 12 months (up 2.5 percentage points on last year) and 95,000 have been waiting over two years for a job.

That means more  young people starting life out on benefits which is precisely what the Government says it doesn’t want.

More worryingly, the longer young people stay out of the workplace the deeper and longer-lasting the social and economic consequences (David Blanchflower lists 10 reasons why politicians should care).

So the question is: how is the Chancellor’s Office of Budget Responsibility going to cost these long-term social and economic effects? And what is this going to cost us in the long run?

2) There’s a deepening dependence on part-time and temporary work –

Both the number of people in temporary and part-time work are up (1.2 and 0.1 percentage points this quarter respectfully).

But it is the number who fall into this type of work because they couldn’t find permanent or full-time work that is most worrying: a 5.1 percentage point increase and a 7 percentage point increase respectfully.

Let’s not pretend a job is a job is a job. The Government should recognise the negative and perverse effects of long-term involuntary involvement in part-time and temporary employment. It can be a trap as well as a short-term solution.

If young people are starting their careers here it needs to be out of choice not desperation. And there needs to be a clear route into permanent, full-time work.

It is easy to just see numbers when we talk about jobs and the economy. Instead young people need to start championing the kind of job creation they want to see, not just what politicians think they can make do with.

Vincenzo Rampulla is Officer without Portfolio on the Young Fabian Executive.

Labour and the World: The Rational and the Romantic

Yesterday evening the Young Fabians hosted a round table as part of our Labour in the World Policy Commissions with Labour MEP for London Mary Honeyball. The meeting got a little stuck on the tactics of how Labour talks about Europe, rather than the political direction for Europe. Specifically, the question discussed was: how do pro Europeans make the case for EU membership in a net contributing EU member state?

There seems to be two approaches: the rational and the romantic.

Of the large net contributors to the EU budget, the French and Germans seem to fall on the romantic side, they hold a deep routed historical and ideological commitment to the European project following the aftermath of WW2. However the significant CAP and Structural Funds they share between them bend towards the rational. The Italians have the EU to thank for ridding them of the Lira, another rational argument. But what has Britain got to shout about? And will it be rational facts or romantic ideals that will work to make case for EU membership in any potential future vote on the matter?

During our period in government, departments successively made the case for Britain’s EU membership rationally and dispassionately, dealing with hard-headed facts. We spoke about trade, jobs, market access and a single set of market rules all meaning British companies and jobs are better off with Britain in, even if we pay more to the budget than we get back in hand outs (the rebate included). So our position in effect was (and largely still is) this: we pay more in, but without it, we’d be poorer. So in effect, EU membership is an indirect fiscal benefit to the Treasury and thus UK taxpayers.

So far so rational, but it’s not exactly going to send people rushing to the polling station to cast a yes in any prospective future referenda. So what is?

Do we need instead need to break the issue down to the emotive and evocative, using stories and images backed up by hard-headed facts?

The image that Europe, a continent that had been in conflict for centuries, has been at peace for over half a century is strong but it doesn’t seem as relevant today as in the last century.  But twin that with the rational facts of our inter-dependent trade and we might just have a script.

So to tell a story evocatively, as well as dealing in rational facts, Labour should weave a narrative of Britain needing to stand on the world stage with others and not alone, needing to draw on the resources of others to forge a way forward, needing to help those in their greatest need and a Britain that looks outward not inward and to quote a phrase, looking forward not back.

Brian Duggan is Young Fabian Policy Officer.

You can find out more about the 2011 Young Fabian Policy Commissions by clicking here.

Why Labour’s economic narrative needs to change

In this member post, Young Fabian member Max Krahé argues that Labour should own up to its economic mistakes, or risk losing the argument at the next general election.

In order to win the next general election, Labour must grapple honestly with its economic past. It should highlight its mistakes, and not overstate its achievements. Labour has everything to win from admitting mistakes, and everything to lose from denying them.

This article is not about actual economic analysis and will not dissect Labour’s economic record. It is about taking a step back and looking at narratives that can credibly be constructed. It is concerned with the image of Labour’s economic management, not with the actual record.

Labour got a lot of economic decisions right in government. But attempting to tell a story about ‘Labour’s decade of economic golden years’ is foolish: in the midst of the largest recession since 1929, a narrative of success is unlikely to wash.

The recession started under Labour, and in a sector closely associated with the Labour boom. People who have lost jobs, seen their savings wiped out, or find themselves in negative equity do not care if inflation was under control for the last 10 years. Labour’s economic successes are too far removed from most people’s day to day experience.

Negative stories on the other hand, including of course the Tory ‘deficit denier’ narrative, fall on fertile ground: they effectively exploit a gulf between positive Labour statements, e.g. ‘look at how well we managed the economy’, and people’s daily lives.

As a simplistic positive narrative about the economy is not viable (nor indeed true), what should Labour’s message be? A simple story might be this: Yes, debt was on the high side, and not every pound spent was spent wisely. The deficit was structural.

Nostra culpa, nostra maxima culpa*.

It’s not a line that should be used unprovoked, but could form part of any response to the next round of deficit denial and ‘Labour mess’ allegations.

How might it play out? By accepting the Conservative’s accusations we end the argument about national debt levels, and vacate ground on which the Conservatives are winning. Reducing debt levels is generally perceived as a good thing (as distinct from the narrative of ‘cuts and austerity’). So let’s not talk about debt.

Of course, the Conservatives may continue to attack ‘Labour’s high deficit’. So much the better: criticising a previous government’s policy would make the Conservatives look like an opposition party, undermining claims of being forward-looking and concerned with growth and the future of this country. It would lend support to our rival narrative of the ‘no-vision austerity Tories’.

Compare this with a continued defence of the deficit. In the short term Labour risks looking like a sore loser, and the deficit denier story may sink in for good (dishonesty is probably more damaging than excessive spending).

Even if the Tories eventually stop making ‘deficit denier’ accusations, this would merely freeze the debate. At the next general election expect the Tories to wheel out the same accusations: Labour cannot be trusted on the economy, they are still deficit deniers etc etc. Unless a credible counter-narrative has been established in the meantime, these statements will fall on fertile ground.

So if we don’t settle this debate now, we risk being branded (successfully) as economically incompetent at the next general election. Or we admit to our mistakes at a later time, taking the inevitable hit in the polls closer to the election.

The time to own up is now.

We should not be afraid of buying into the Tory story of the ‘Labour mess’. This will settle the issue, neutralise one of the more potent rhetorical weapons in the Conservative armoury, and will do so with plenty of time to spare before the next elections.

If we do not own up to our mistakes now, we leave ourselves open to Conservative attacks. And doubts about Labour’s competence on the economy are likely to re-surface at rather inconvenient times.

*Admitting to leaving behind a bit of a mess shouldn’t taint Labour as economically incompetent, if managed well. In owning up to the ‘Labour mess’, we regain the credibility needed to argue that 2008 was 1929 but 2009 was not 1930. Yes, debt may have been on the high side, but let’s not miss the wood for all the trees: Labour has prevented a catastrophic collapse of the banking sector; Labour has saved the country from the brink of an economic depression. Maybe it’s ok if we didn’t leave the kitchen spotless in the process?