The Thirties is the unlikely start point that may just turn the election for Miliband

Inside Westminster

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The Independent Online

The wheels turn slowly in the Labour Party.

As Ed Miliband and his team agonised over whether to make what they called “an intervention” on the economy before Christmas or wait until January, manna from heaven landed.

It came in a few words in the 228-page report published by the Office for Budget Responsibility (OBR), the tax and spending watchdog, alongside George Osborne’s Autumn Statement 10 days ago. His planned cuts would mean that by 2020, day-to-day spending on public services would be at its lowest level since the late 1930s as a share of Gross Domestic Product.

A furious Chancellor knew it was toxic. That is why he attacked the BBC for daring to refer in its coverage to George Orwell’s The Road to Wigan Pier about deprivation and unemployment among the northern working class in the 1930s.

The OBR’s warning tipped the balance in favour of Miliband making the long-overdue speech on the economy on Thursday rather than in the new year. Labour strategists, including David Axelrod, the party’s highly-paid former Obama adviser who made a rare two-day visit to London for talks this week, realised that the parallel with the Thirties was too good to miss. It was easy to knit it into what Axelrod constantly tells Labour it must focus on – its “big economic offer”.

Miliband advisers revised their list of dividing lines: the Thirties fitted neatly with “the future” (Labour) or “the past” (Tories) on public services and the “many” (Labour) versus “the few” (Tories) on the economy.

If Miliband had made a speech warning that Osborne’s £55bn of cuts would take Britain back to the Thirties, he would have been ridiculed. But all he was doing was quoting the independent fiscal watchdog set up by the Chancellor. The economics of it might be a bit dodgy: GDP is 10 times bigger today, so public spending will be too. But the politics was explosive.

Osborne knew it. He prefers the OBR’s “real terms” figure showing that state spending will fall to 2002 levels. But the damage has been done. Labour will hammer home the parallel with the Thirties until the May election. It dovetails nicely with the party’s other attack: the Conservatives’ cuts are now driven by an ideological desire to shrink the state because Osborne wants to run a £23bn budget surplus by 2020 – and hand out £7.2bn in income tax cuts rather than spend the money on preserving services.

 

The Tories won’t admit it, but they have got a touch of the jitters. They know the public understands the need to balance the nation’s books. But they also know that voters would not support an axe being taken to public services for the sake of it. Tory MPs expect the Chancellor to refine his message on the £23bn surplus. “He has over-egged the pudding,” one said.

The Cameron-Osborne pitch has been based on “sound public finances and decent public services”. This week Labour moved on to the same turf. Miliband’s message was that Labour would balance the books and protect public services. It may sound too good to be true, an unlikely land of milk and honey.

“We’re the ‘nice cuts’ party now,” a sceptical Labour MP quipped. But if the public thinks the Tories are still the “nasty party,” Labour might just be back in business.

Labour strategists sense a turning of the tide. It is too soon to be sure about that but it is not a mad hope. At last, Labour now has a story to tell on the deficit.

It portrays the Tories as “one-dimensional”, because Osborne implausibly says he will not raise taxes and will make all his savings through cuts. The Liberal Democrats are “two-dimensional”, according to Labour, as they would opt for a mix of cuts and tax rises. You guessed it, Labour is the only “three-dimensional party” with a combination of cuts, tax rises and higher growth in a reformed economy.

The latter point may sound like motherhood and apple pie but lower than expected tax revenues – because so many of the new jobs created since 2010 are low paid or part-time – give credence to Miliband’s argument that the cost of living crisis must be tackled to clear the deficit.

On Monday, Labour will tackle the other strategic weakness which has dogged it in recent years – immigration. “We are clearing away the undergrowth to have a clear path into the new year,” said one insider. In January, Labour will focus on the cost of living and its favourite theme – the NHS.

If Miliband thinks he has ticked the deficit box with one speech, he is still in denial. I suspect he knows that much more needs to be done. His speech should have been made when he became Labour leader in 2010. To convince the voters, he will have to repeat his message many times before next May. So will his shadow Cabinet.

Labour will also need to announce some big-ticket cuts before the election. Miliband argued that it would be better to wait until the party took office. That won’t wash as the election approaches: an incoming Labour government would have nine months to find £9bn of cuts, as it has accepted the Coalition’s spending limit for the 2015-16 financial year. I doubt the public would take Labour on trust without seeing more than the peanuts it has offered so far.

However, Labour is finally back in the game that will decide who wins power next May. “We are on the pitch now,” one Miliband aide admitted. “We weren’t before.”

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